INTEREST RATE HEDGING PRODUCTS - HAVE YOU BEEN MIS-SOLD?

First ask yourself four simple questions:

1.         Did you take out a new facility with your bank on or before 1 December 2001?

2.         Does your facility letter use any of the following words…Swaps, Caps, Collars or Structured Collars?

3.         Are these facilities less than £10 million pounds?

4.         At the time you took out your facility, did your company have:

i. Turnover of more than £6.5 million; or

ii. Balance sheet total of more than £3.26 million; or

iii. More than 50 employees.

If you have answered yes to any of the above, chances are you have been mis-sold a product by your lender. Redress may be owed to you and in some cases you may even be entitled to additional compensation.

Get in touch with GDP Partnership today to see if we can assist.

HOW SAFE IS YOUR PENSION?

I think the vast majority of people would answer that question with the answer 'Completely safe'. Unfortunately they would be wrong!
Wherever you travel, from jurisdiction to jurisdiction, there is a general assumption that whatever may happen, no one can touch your pension. Many believe that whilst other assets can be targeted by creditors, the pension remains off limit. That is not the case.
In these difficult times where insolvency is more the norm than the exception it is vitally important that everybody realises this and understands the type of pension that they have, as there are very distinct differences.

In law, your pension is an item of property and is an asset of a member, just like any other asset. It is treated as a current right to a future payment. It is possible to use them as security or assign them to a third party unless there are specific rules to the contrary governing their use. In pre and post Celtic Tiger Ireland, charging pensions as security at the banks to access the sums on offer became quite common place.  In this regard there is a huge difference between an occupational pension and a personal pension and it makes a
substantial difference to you.

Occupational Pension.

By far the better type of pension to hold if you are experiencing serious financial difficulty. An occupational pension is one established by an employer for the benefit of the employees. An employer would neither expect or allow for such a pension to be used as collateral for borrowing or be available to discharge the
liabilities of the employee. You will typically find that occupational pensions include a provision that the benefits of the pension will be forfeited in certain circumstances. These would include any attempt to assign the benefit of the pension if the person entitled becomes bankrupt. In those circumstances the benefit of the pension falls back into the general pool and if the rules permit the trustees can pay the benefit to another class of beneficiary which may be one of the member's immediate family. This will only occur if the rules do so provide and the trustees exercise their discretion in that manner.

Personal Pensions.

Unfortunately these are viewed very differently. A personal pension is subject to contract and typically there are no forfeiture clauses protecting the pension benefit. For this reason, entitlements due under a personal pension are open to attack from creditors.
Many people often think they can ride out the storm as the pension will only be paid out in the future. That hope is largely in vain. The example of re L Bankrupt is a case where no forfeiture clause was available in the pension. A Solicitor took out a retirement annuity contract in 1982. In 1990 a bankruptcy order was made against him and he was subsequently discharged from bankruptcy in 1993. A year later in 1994, he retired and sought the benefits of the policy. The trustee in bankruptcy claimed the benefits under the pension and succeeded in his claim.  Also never forget that the Revenue have significant powers of attachment where a debt is due to a taxpayer. Under the Tax Consolidation Act 1997 the revenue can require that the amount of tax outstanding is deducted from the debt and paid to the Revenue instead.

SUMMARY

These are the details that nobody thinks about when they are planning a pension, nor why should they. It's really only in times such as these that it becomes considerably more important. Everyone, at least should know what type of pension that they have, whether or not it has been preferred or assigned as collateral and most importantly whether or not there is a forfeiture clause. These are the essentials.

A pension is in place to ensure that you have a reasonable standard of living after your retirement. At least this is what we all believe. As the future remains so uncertain in Ireland, it is more important that you have the right type of pension in place and seek the necessary advice.
Were you to be declared bankrupt, a personal pension is liable to attack by your creditors. If you hold an occupational pension, on maturity any lump sum payment can be at risk and possible ongoing attachments to income based on your living expenses.

If you require any further information please contact GDP Partnership

Better to be safe than sorry!

ICELAND AHEAD OF THE GAME

Iceland’s government has announced that it will be writing off up to 24,000 euros ($32,600) of every household’s mortgage, fulfilling its election promise, despite overwhelming criticism from international financial institutions.

The measure was introduced by the country’s prime minister, Sigmundur David Gunnlaugsson, the leader of the Progressive Party which won the late-April elections on a promise of household debt relief. According to the government’s website the household debt will be reduced by 13% on average. 
Citizens of Iceland have been suffering from debt since the 2008 financial crisis, which led to high borrowing costs after the collapse of the krona against other currencies.  

If you are an Irish person reading this, what are you thinking?  As the Irish debt crisis continues to escalate with no let-up in sight anytime soon, surely a measure such as this by the Irish government would be on everyone’s Christmas wish list.  The mortgage crisis and household debt problem in Ireland is reaching critical stage with more than 100,000 mortgages in 3 months arrears or more.  The banks have been ordered by Central bank to deal with the issue as opposed to their approach to date with kicking the can down the road.  Are they actually dealing with it now – well the jury is out on that one?

Former President Bill Clinton said on a visit to Ireland on October 2011, that the country will not recover until there is debt forgiveness.  I whisper that quietly for fear of arrest as those two words are forbidden in Ireland – why? Because the banks says so.  It’s very clear now that the banks are ruling the roost, and continue to drag their heals over any kind of reform.  With the recent publication of the Tomlinson report, where it highlights the practises of RBS/Ulster Bank in the past couple of years, and the other stories coming out of banks across the globe – I don’t hold out much hope that as far as banks go, anything will change regarding how they conduct their business.

It is the government of each country that makes the laws and at the end of the day is responsible for the overall well being of any nation?  You cannot help but admire the courage and foresight of the Icelandic government with this debt forgiveness move for its people – looking around the world right now, it would appear that they are the only set of rulers who actually have the balls to help the people who elected them into power.  Well done Iceland!

Conor Devine MRICS

NAMA – THE STATES DRAGONS DEN

When Frank Daly the NAMA CEO and his team were pitching his business plan to the Irish people in 2008 to bail out the banks, like every investment, you cannot really analyse it until you get a better understanding of the actual return on your money. 

If my memory serves me well, the return on this investment after the 10 year period 2010 – 2020 was earmarked to be in the region of €6bn.  Considering the investment in the project by the Irish people was upwards on €32bn that would equate to just over a 18% return on their money. Not terrific considering the huge sums and the risk involved, but not bad all the same, considering the times we were in globally.  The other important point to consider was the benefits of the business plan namely that by bailing out the banks, the country would return to growth as the balance sheets of the banks would be repaired enabling them to start lending again.  Note there was no referendum on this one, as it was deemed for example not as important as the gay marriage debate, however the government pushed ahead and the Irish people bailed out the banks and in the process created the biggest property company in the world - NAMA.   

Worryingly in 2010 NAMA came out to say that they have had to revisit their figures and they felt that after its lifespan, the investment would return the reduced figure of £1bn to the Irish state.   This is a significant drop of over 15%.  Even more worrying is the fact that Brendan McDonagh, the head of the national agency, told an Oireachtas committee in October 2013, that it was now aiming to only break even by 2020 rather than make the €1bn profit that had been included in its earlier business plan.

Now if you were Duncan Bannatyne or Debra Meaden at this point in the Den, you wouldn’t be very impressed at all as the prospects of getting no return on your money appeared quite high, what a downer.   The other aspect of the deal you would be asking yourself is has the country returned to growth and are banks’ lending again.  Answer to the first question we would hope is yes……. and on the whole the answer to the second part is a resounding NO. 

In fact in Ireland right now, the foreign banks are packing up their files, clearing their desks and running for the hills.  In the last few months we have seen announcements by ACC and Danske to join a host of others who have decided that Ireland is a now a no go zone for banks.  This is extremely damaging for the country as we need a stable banking structure to have any chance of turning the corner anytime soon.

 Back to Nama – The level of return from Nama assets will depend on the performance of loans and the property market in Britain and Ireland over the next seven years. It would be interesting to know what forecasts or assumptions Mr McDonagh has built into the current business plan that he is so pessimistic about the outcome., a very sobering thought altogether. While Nama continues to make operating profits, namely taking in more money than it pays out; further impairment charges keep hampering its financial progress. By the end of last year, it had made total impairment provisions on its loans of  €3.26bn, less than two years after buying them. In effect, this means the agency has overpaid for the assets by €3.2bn (modest figure if you ask me).

You often hear NAMA representatives come out declaring how well they are getting on, the new finance they are injecting into the economy and very proud of the fact that they are not in the business of fire selling properties.  Again you really have to question each of these points.  In fact NAMA is now doing what it said it would never do – sell Loans.  If you were watching this situation play out, you might come to the conclusion that they are making it up as they go along.  Who could argue with that point?  For me as an employer and an investor – it’s all about the return on your money, and my feeling is that NAMA will fail miserably in this department and the Irish taxpayer will lose billions of euros in this opportunity – I genuinely do hope I am wrong.

To date NAMA has brought in around €9.2bn by selling off assets, 80% of which were based in the UK, and described by some as the low hanging fruit. 63% of the sales have occurred in London, in fact which is a rising market as it is still seen as one of the safest places in the world to place your money.  A dragon might question this model as the London commercial property market is now very much on the up and if Nama could have hung on, it probably would have got a much better price today, and in the years ahead.
Imagine Brendan McDonagh is correct for one moment, and NAMA does end up breaking even. In 2020, we will look back at how Irish citizens took on the risk of setting up the biggest property agency in the world, with over €70bn in loans, finances by  €32bn in bonds, paid back the  €32bn and the interest and then shut up shop.

 The tax payer would have absolutely nothing to show for it – 0% return on its money. With the benefit of hindsight, maybe if this was a real dragons den scenario, they would have been better putting the €32bn on a horse at Cheltenham – as time goes by, I am struggling to see the difference.

 

Conor Devine MRICS

DONT BANK ON YOUR BANK.....

The Office of Fair Trading (OFT) has asked Banks to disclose historic errors involving loan agreements after it become alarmed that the problem is endemic amongst a large number of Banks. Northern Rock, the Co-operative Bank and Barclays have all recently paid out several hundred million pounds in compensation claims.

The OFT have put up to 50 banks and building societies on notice after the three banks admitted to having to refund some of their personal loan customers because their paperwork did not comply with the Consumer Credit Act.

Northern Rock paid £270m to 150,000 people in December 2012, and in September it emerged Barclays faced a bill estimated at £100m to repay as many as 300,000 customers. Last month, Co-operative Bank revealed it had increased its provisions for customer redress, in part to cover "an identified breach of the Consumer Credit Act".

The errors occurred because the Borrowers were sent incorrect documentation in a breach of the Act. The OFT has now stepped in following recent failures by some banks to fully discharge their obligations.

These revelations further confirm what everybody has come to learn over the last 5 years, that the Banks do not always do everything correctly and are also not very likely to own up to their mistakes.

The question then arises; how do you hold the Bank to account if you have a suspicion that you have been treated unfairly in relation to your borrowings?

Firstly you should seek professional advice from professionals who are familiar with the consumer credit act and how this act applies to your borrowings. The next set is for your professional to mediate a return of funds or compensation.

GDP Partnership specialises in this form of mediation with the Banks and has recently secured refunds for several clients in relation to errors in lending practises and miss management of accounts.

Author : Louis Waters ACA

Last bank out - turn off the lights!!

Thursday 31.10.2013

Hot on the heels of ACC Bank announcing an exit from the Irish Banking market we now have Danske Putting on their running shoes and making for the exit. Who can blame them?

Last week, ACC the Irish subsidiary of Dutch banking giant Rabobank said that next year it will close all its branches and business centres to the public and give up its banking licence. Danske Bank, this morning has announced that they will be pulling all of their services bar those to their corporate and institutional customers.
Both have suffered significantly with the deterioration of the Irish property market over the last five years.  ACC Bank posted losses of over €200 million last year. Danske Bank have shown losses of €31.4 million for the first nine months of 2013 and added impairment charges of €22.8m. There just seems to be no end to the pain and the foreign banks have had enough.

ACC will now focus on debt recovery.  The former National Irish Bank shifts their attention solely to their more elite customers. Both have very publicly reached the conclusion that the situation is unsustainable and that they need to take action now.

It really begs two questions. Who will be left to participate in the Irish banking market? And what of the timing?
Very few banks are left.  PTSB appear to be in the banking wilderness with no clear direction on what they will look like. Allied Irish and Bank of Ireland remain but appear hamstrung at their apparent inability to lend. The only bank emerging with any sign of growth is KBC, but clearly they are another bank whose allegiance to these shores may not be as resilient as the domestic banks.
The question I find more fascinating is, why now as opposed to earlier or later? With Ireland allegedly poised to exit the bailout plan towards the end of this year, I think there is a little more to it than is immediately seen. Contrary to their performance over the last ten years, bankers aren't naturally stupid.  All are deserting the ship that has been sinking but there are clearly those in the know who possibly think it has further to go.
Against a background of a number of people championing the spectacular recovery in Ireland, the action of both ACC and Danske would suggest a slightly different landscape. If everything was rosy in the garden why exit after weathering five years of pain? The problem that we have foreseen all along is the manner in which the pillar banks are looking to resolve their own impaired debt books. Placing mortgages on interest only periods and offering split mortgages is only like putting your finger in the dam to protect the tidal wave that is ultimately coming. Stemming the tide is not what this country needs. Address the debt issue or it will continue to take control as it has done for the last five years. Those in power, both in government and banks are operating in the belief that if we slowly removed the finger stuck in the dam, the outcome won't be that bad. They are very wrong.

Danske and ACC, rightly or wrongly are addressing their issues, the pillar banks are not. Kicking the can down the road may have worked in the past but the enormity of the problem remains overwhelming both to the individual and the borrower.  We shall watch this space with interest.

Nick Leeson

Facts or Fiction - The Housing Market

Wednesday 30th October 2013

A dictionary definition would state that Propaganda is a form of communication aimed towards influencing the attitude of the community toward some cause or position by presenting only one side of an argument. For Propaganda to work it is usually repeated and dispersed over a wide variety of media in order to create the chosen result in audience attitudes.

Once again we are being told that demand for property is outstripping supply in Dublin and that prices are being pushed higher and higher. Official figures are showing that the rise in prices is as much as 12% this calendar year. It also outlines it’s the fastest rate of growth since 2007 and is entirely driven by the Dublin market, however there appears to be evidence that it is creeping outside the capital.

As much as anybody else I would be looking for signs of improvement in the market but I would also be acutely aware of how easy it is to manipulate a market. For five years, every market commentator has been looking for the smallest sign of a 'green shoot' of economic recovery. As some of the statistics now appear to be confirming.  Any housing market is largely based on sentiment. Sentiment, if powerfully driven by media is largely irrational. As soon as you make decisions based on sentiment, you need to be fully aware of the facts.

Propaganda often presents facts selectively to encourage a particular synthesis, or uses loaded messages to produce an emotional rather than rational response to the information presented.

The way that these latest set of statistics from the Central Statistics Office (CSO) have been presented do exactly that. It’s important to remember that

·         The divergence between Dublin and the rest of the country suggests a market supported by a lack of supply – this will very quickly not be the case

·         An influx of cash buyers currently into Dublin supported by tax exemptions and above average yields is currently compensating for weak mortgage lending.

·         There are well over 100,000 distressed mortgages in this country which need to be dealt with. This figure is rising… fast!

We all want to believe that the market is changing. Heaven knows I spent three years at a desk in Singapore, hoping that each change of direction wasn’t the false dawn that the last one was. Unfortunately those Eureka moments are very few and far between. Talk of property prices increasing is providing some people with the hope that there is a light at the end of the tunnel, an end to their problems. Talk of solutions that revolve around interest only periods or split mortgages that rely almost entirely on a revival in the property market are not solutions at all – they only delay the inevitable.  Similar to putting a sticking plaster on the Niagara Falls on many occasions.

The more worrying point is that we are seeing people in our debt advisory business who are now thinking that their investment portfolio of houses is going to come back to where it was – very simply, this is not going to happen.

Any attempt to boost confidence in the property market, any attempt to sway sentiment with limited observance of the facts, any such propaganda should be treated with the utmost care.  Movement in the property market in Ireland, absolutely and must be welcomed.  Putting the kettle on for prices to recover to where they were…. Well I think most would accept this is more of an illusion than reality.

 

Nick Leeson

A Zombie Nation

 

Wednesday 30th October 2013:

Ending the zombie business crisis plaguing the economy would be a cheap and easy way to boost growth, argued insolvency professionals, urging George Osborne to push banks to take the plunge on bad debts and write down the debt to aid any projected recovery.

Around 50,000 firms are thought to have no hope of repaying their loans in full, and are seen by some as a drag on growth, tying up bank and labour resources unproductively.  It has been reported that there is in excess of 100,000 others with good growth potential but that are struggling in the weak economy.

The time has finally come whereby Banks are having to address this issue either aggressively through the insolvency legislation or through mediation and working with the businesses to achieve an amicable solution. Whichever approach is taken by banks, the emphasis will be on business owners to demonstrate that their business can grow and succeed.

GDP Partnership has been pioneering the mediation route for the last three years and has achieved many successes from both the perspective of the borrower and the bank.

Unfortunately the main cause of a lot of these businesses woes are that they borrowed heavily in the last ten years against assets which have now fallen dramatically in value, and in this part of the world it has largely been on property. This fall in asset value has now caused the borrowing to be unsustainable and significantly impairing their balance sheets. It is this now unsustainable debt which is holding the company back from growing and adding value to the greater economy.  The net result of this is the banks on many occasions are draining the what was once a progressive business, of any cash to prop up the bad loans in the company.  Even more worrying is a trend which has been on-going for the past while is that banks are draining company's of cash to prop up loans that directors of the company took out in their personal names.  This is not right and is suffocating the business and any chance of it growing and in many occasions continuing to trade.
 

An equitable and fair solution to this problem is for both borrower and lender to share some pain. In many cases there is an opportunity for the lender to re-base the loan to an affordable level that the company can service; this level may or may not be equal to the market value of the asset, however to get the bank to play ball it must be a better proposal to the nuclear option namely winding the company up and appointing a receiver to sell the assets. If it can be demonstrated and presented properly that by agreeing to re-base the debt at a figure which is a better option for the bank than the doomsday scenario, then most banks today will listen. 

In the past few months our team have reached a number of agreements with the banks on this basis, which is a very positive development.  However the health warning here is we need the banks to move faster and be more transparent in their dealings.

It makes so much sense to approach the debt problems facing the country with a solutions hat on as opposed to that of a funeral director.  There are now thousands of zombie companies across the nation from Derry to Cork and unless, those in this unfortunate position bring the solutions to the banks, their futures are going to be in serious jeopardy. 
From a banking perspective let’s hope the industry becomes a lot more proactive in this regard and takes a more pragmatic view when it comes to writing down the debt, and letting businesses get back on their feet again.  We need a more medium to long term approach to be adopted for this to happen.

Conor Devine MRICS

Austerity - The Low Hanging Fruit !!

As the dust starts to settle on the seventh austerity budget in five years, the ripple effect of many of these measures will take many months to really hit home. Once again those affected are the most vulnerable and those most in need of help – the low hanging fruit which are easiest to reach and place in the bucket. In a country crippled by debt, there had to have been other options but the elected voice of this country failed again to act.

The last five years has seen one laceration after another inflicted upon the back of those with the most heaviest burden. Has it ever been any different? Hundreds of years ago, the same class of people would have been at the front of the line, cannon fodder for any opposing army. The Generals would have held back in the rear, still enjoying the finery's of life whilst everyone else laid down their life in a bloody mess. Its not much different today, the politicians pontificate in Leinster House, protecting their brethren, flexing their muscle and letting others bear the pain. I'm as far from a socialist as you can imagine but I laugh at modern day politics. Twenty years ago in the City of London, every time an election loomed, every trader and banker was making plans to move location if Labour won as the higher rate of tax was set to rise. They didn't have far to go, Dublin would have been fine as the Labour here is really a sheep in wolf's clothing and wouldn't have been worth bothering about

Yes, the Budget complies with Troika guidelines but in taking from those most in need is not only not addressing the real debt problems in this country, is adding to them. Banks are now remodelling your debt, some may call it restructuring but don't be fooled. Right now its all about compliance, a box ticking exercise to make sure the Troika is on side. Never forget the banks have the security of your home if you have a mortgage. Unless there is meaningful restructuring with an element of write down, you will likely find yourself back in a situation where you can't afford to pay at some time in the future, now very possibly, the very near future. The bank's will not care if they have to move on your house in one, three or five years time, they always have the security of your bricks and mortar. When the dust settles on the 'Troika' era in Ireland, the banks have ticked their boxes and been complicit. I can guarantee two things

The banks, if not already will make huge profits with little recourse to the taxpayer, and secondly

banks will be far more aggressive in the repossession of homes in the future.

That's their way of saying thank you.

Nick Leeson - Partner GDP Partnership

 

A Clean Slate - Debt, The New Cancer

The Insolvency Service of Ireland started taking applications for its new personal insolvency measures this week. I get the impression that there was nobody beating the door down, nor a long queue forming. That’s no surprise but not for the reasons that you hear many commentators making. Nothing affects people quite like debt, historically it has a dark and sinister undertone that the majority of people keep as far away from as possible. The financial tsunami that we have experienced in Ireland means that it is affecting far more people than it ever has done in the past. Many people will find it easier to talk about a lump that they have found somewhere on their body than be willing to talk about their struggles to pay or not pay their bills. Unfortunately that is the way that it has always been.

There is no doubt that the new legislation has been met with consternation, confusion and a certain amount of resentment because of the limitations that it imposes. Equally so there is no questioning that it has spectacularly under-delivered in relation to the most important aspect – bankruptcy. But it still represents real opportunity for those who use it correctly, whether that is by implementing one of the measures or by using the options that are available as a bargaining tool.

 

Unless you learn about the options available, educate and empower yourself to use them where applicable, it is impossible to make informed decisions about your path forward. Debt brings with it huge social and personal cost. Look around you, you can see it everywhere. We cannot control what the government does with budgets and austerity measures to put the country back on track but you can regain control over your personal situation. Granted it will take a little time and any new insolvency legislation does take time to bed in. Look at the United Kingdom, there was the same consternation, confusion and resentment when the legislation was changed ten years ago but now it is an efficient system that allows people to start again. It has it's critics but it works!

Right now Ireland is at the start of that cycle and it may well take five years to bed in, as it did in the United Kingdom but everyone has the right to avail of the legislation and in my opinion, should.

So whilst most commentators will tell you that the new legislation is an unmitigated disaster, with the exception of the bankruptcy component, I'd say that it can work. But if you don't understand it, don't educate yourselves about the options available, the Insolvency Service of Ireland will sit idle. Please don't allow that to happen.

 

Debt is quite simply an affordability issue

•                     If you can afford to pay, you should

•                     If you can't afford to pay, you simply can't and a solution has to be found.

 

With the education that is required in this area, there also needs to be a fundamental shift in the way that people approach mortgage debt and the family home. In part, this is included in the new legislation. Some simple examples, A couple living in a three bedroom house on their own with no children who cannot afford to pay the mortgage should simply downsize to a property that they can afford to pay for. If you are living beyond your means, for your own financial and healthy well being, you have to make a change. Much is being made of protecting the family home at all costs. In many cases this is ridiculous, split mortgages, warehoused sums and 20 year claw backs are a waste of time. Everybody owes it to themselves to achieve a realistic, sustainable solution. All mortgage debt is secured, banks will expect to receive back all of the money that they have secured on your property. Who can blame them? But they as well as you have never experienced the degree of difficulty that individuals are now facing.

 

Rest assured, there is always a solution, Don't Panic.

Author :: Nick Leeson Principal

The Property Bubble is not Going To Last in Ireland

Piece written by Dan White -- Sunday Independent

 

Don't be lulled by talk of a recovery in the housing market - it's a facade, much like Potemkin's villages.  The 8% rise in average house prices over the past 12 months revealed by the CSO last week needs to be taken with a very large pinch of salt.
With the banks cutting back on mortgage lending yet again and only tiny numbers of properties changing hands, any sustained recovery in the housing market is still a long way off.

Last Tuesday , the CSO published its latest house price index. Not surprisingly, it was the CSO's assertion that average Dublin house prices had risen by 8% in the 12 months to July that attracted the most attention. While this was good news for anyone trying to sell a house or apartment in the capital the news from the rest of the country was not so good, with average prices outside of Dublin falling by 1.5% over the same period.

While, after more than five years of falling prices , any bit of good news from the housing market is welcome, it might not be a good idea to declare the property price crash over just yet. For a start, the CSO house price index only includes properties that were bought with a mortgage. While virtually all homes were purchased with a mortgage during the boom years, this is no longer the case.

Figures published by the Irish Banking Federation on Thursday revealed that while 2,852 mortgages were drawn down during the second quarter of 2013, 5,642 houses and apartments changed hands. In other words, cash transactions now account for just under half of all purchases. Unfortunately, these cash transaction are not being captured by the CSO figures. However, going on the evidence of auctions of repossessed properties where the majority of deals are for cash, it would appear that prices are down by 60% or more rather than the 50% indicated by the CSO data. Doubts about the reliability of the CSO figures are only part of the problem. Even if every house was being purchased with the aid of a mortgage, a far bigger obstacle to gauging the true state of the housing market is the fact that transaction volumes, either with or without a mortgage, have virtually dried up.

According to the IBF, just over 10,000 houses and apartments changed hands in the first half of this year. While this was up more than 10% on the total for the first half of 2012, it would be a brave man who would bet on the increase being sustained into the second half of this year. The number of housing transactions in the second half of 2012 - more than 15,000 - was artificially swollen by a number of tax breaks for first-time buyers that expired at the end of last December.

Far more likely is that the number of houses and apartments changing hands this year will be somewhere between the 18,000 recorded in 2011 and the 24,000 for last year, probably not much more than 20,000. What this means is that, at current levels of activity, each one of Ireland's almost two million houses and apartments can expect to change hands once every 100 years. That's clearly not a sustainable situation. And why have transaction volumes evaporated to virtually nothing? Blame the banks. Despite expensive advertising and PR campaigns designed to get us to believe the opposite, the brutal truth is that even based on the IBF's own figures, mortgage lending is still falling, down another 1% to €518m in the second quarter of 2013 compared to the same period last year. The IBF's claims that mortgage lending was up quarter-on-quarter are completely irrelevant, not to say disingenuous, as the first quarter is traditionally by far the quietest time of the year for the housing market.

So far this year the banks have approved €850m of new mortgages. Baring a sudden and unexpected increase, it is hard to see new mortgage lending for the full year going much over €2bn, a 95% reduction on the €40bn lent in the peak year of 2006. given the reluctance of the Irish banks to lend, even to good customers, and the obscene interest margins they are gouging from their variable rate borrowers, it hardly comes as any  surprise that a number of overseas banks, most notably the South African lender Investec, are looking at entering the Irish mortgage market. So no credit and tiny transaction volumes on the one hand, but an apparent price recovery, at least in the better Dublin suburbs, on the other. What the blazes is really going on in the Irish housing market?

Looking at the current situation, it's hard not to be reminded of 18th Century Russian statesman Prince Grigory Potemkin, chief minister and sometime lover of Empress Catherine the Great. Whenever the Empress got it into her head to journey through her vast territories, Prince Potemkin would travel a few days ahead of her constructing "villages" that were in reality no more than facades, populated by suspiciously well-dressed and fed "villagers" thus ensuring Her Majesty  rapturous reception wherever she went. While the Russians may have had Potemkin villages with an attractive facade concealing the poverty that lay behind, we in Ireland have a Potemkin property market, where the facade of an apparent increase in prices conceals the reality of tiny volumes and virtually no mortgage credit that still stands in the way of any sustained recovery.

A NEW DAWN OR MORE OF THE SAME - DEBT IN IRELAND

Most people are aware at this stage that the new insolvency laws are about to come into play in Ireland in the next few weeks.  The idea behind the new system is that the options for debtors within the scheme will allow households to gain control of their finances and deal with the uncontrollable debt problem in society.  Ireland historically over the last generation has had a very punitive system in place in terms of dealing with insolvency matters, and although some would view the new rules as some way off a solution, I suppose it’s a step in the right direction.

Our business GDP partnership set up a debt advisory team in 2010 and we have been very successful with this model in Northern Ireland over the last few years; typically bringing solutions on behalf of borrowers to creditors, mostly institutions.  Although the banks are particularly difficult to deal with we would have seen a seismic shift in their attitudes along the course of the last few years.  The insolvency system in the UK works quite well, and generally if Mediation by our team is hitting a brick wall then our clients will avail of the options at their disposal under the insolvency laws. The huge difference between the insolvency laws In the North is that they have been working more than twenty years – the huge challenge facing the South of Ireland is that a completely new system is just about to be introduced.  Having spent some time studying the options available to deal with the debt overhang, it’s very clear in my view, that in the short to medium term there will be organised chaos in the weeks and months ahead.  Over the past few months I have spoken with a number of legal, accountancy and insolvency firms in Republic of Ireland, and the feedback on the new rules is overwhelmingly negative.  Under the new system there will be two key players 1) Approved Intermediary and 2) Professional Insolvency Practitioner.  The AI deals with the lower end unsecured debt and the PIP will be dealing with the secured and unsecured debt.  Last week the ISI handed out 14 PIP licences to the first batch of professionals and the idea is that over the next few months, more PIPs will get their licence to practice.  The success of this new system in my mind lies with the attitudes of the banks in Ireland.  Very simply if they do not play ball and accept the proposals put forward by the borrowers, the system will spectacularly fail.  This is at the heart of my concerns and is a very real possibility.  In my experience the bank will not want to be dragged into a personal insolvency arrangement and worse bankruptcy case.  They will want to get their pound of flesh out of their customer on a one to one basis. This is power for the course in Northern Ireland and will be duplicated in the South of the country.  It’s very straight forward from my point of view.  If the banks do not pay ball then they need to be held accountable by the Central bank who is telling anyone who wants to listen that the banks will be working positively with the new rules. I am not so sure about this given my experience of the past few years.

The key for me in all of these things is education.  Education for the borrower around the options, banks policy and devising a plan that is best for them and their family.  Make no mistake about it; the island of Ireland has way too much debt, from a sovereign, SME and personal point of view.  We will not recover and move forward as a nation to the debt overhang is dealt with.  For me this will take a minimum of five years, and unless the banks in the country toe the line and start being proactive and more transparent in how they run their business, the pain will continue for some time yet.  I will be watching with interest how the next few months go in terms of the new framework now in place.

Conor Devine MRICS

Banks don't want the keys back!!

Accounts recently filed by AIB’s mortgage unit include details about the health of the bank's mortgage lending and their efforts to restore normality, make for very grim reading. What the accounts show is that repossessing property is not a solution for either the Bank or Borrower. In the last year AIB have forcibly repossessed and sold 17 properties for €2 million with an associated debt of approximately €6 million, this resulted in a LOSS of €4 million to the Bank. AIB will now look to the borrowers for repayment of this €4 million loss.  The chances of them retrieving all of the shortfall…well, I’d say there is more chance of Joe Brolly getting the freedom of County Tyrone!!!

 GDP Partnership has been pioneering an alternative method to forced repossessions for the last 4 years in Northern Ireland and more recently in the Republic of Ireland. This is the Consensual Sale method which results in a greater return to the Bank on the sale of the property and also maximum debt reduction for the borrower. The Consensual Sales method is where the property is sold privately by the borrower on the open market to achieve the best possible price, all with the blessing of the bank. As we have all come to know when word gets out that a property is being sold by the bank its value typically plummets at times up to 50%.

The consensual sale process mitigates this risk, which clearly is better for the bank and borrower.  The other positive for the bank is that they do not have to instruct their lawyers or receivers saving money and time.  In conclusion it’s the best way forward on many occasions.

The method requires both bank and borrower to work together in an open, willing and transparent manner. GDP Partnership has been working to facilitate this relationship between bank and borrower through our mediation services. Our experience has proven that debts issues can be successfully and quickly resolved to the economic benefit of borrower and bank through the mediation and consensual sale process.

Over the next few months, thousands of properties will be coming to the open market as the banks continue with the very difficult job of cleaning up their balance sheets. It would be our view that we will see a more consensual approach being applied to the sales process and less fixed charge receiver appointments.

Conor Devine MRICS – Principal

House prices to fall further in Ireland

I don't care how good you are at PR or excel in the use of words, it would be impossible to suggest that I was a leading student of economics. That being said, I have no problem understanding the basics.

The media frenzy over the past ten days regarding the housing recovery in Ireland has been a little disturbing and premature at best.  Day after day we are seeing some journalists, estate agents and economists predicting that we have hit the bottom and that prices are beginning to recover across the country. Let me remind these erstwhile commentators of their first economics lessons. All other things being equal, when demand exceeds supply, prices will rise. When supply exceeds demand, prices will fall. Their most recent reports are suggesting that demand is now equalling supply thereby bottoming out the market and is now set to rise. What rubbish!

I'd suggest that they spend less time in the boutique cafes of Amsterdam and more time telling the truth. Over one hundred and eighty thousand residential and buy to let mortgages are in arrears of over 90 days. A leading treasurer at a UK bank once informed me that when a mortgage is missed by more than two payments, typically 60 days, only 2% of these people ever get their mortgage back on track. That’s a shocking statistic! What is going to happen with all of these buy to let mortgages, they are going to hit the market in the next few months more supply. Of the 100,000 or so residential mortgages in arrears, how many will be restructured and kept from the market. A few will but many borrowers are already returning the keys in advance of having their home repossessed - even more supply. I'm only touching the surface here and not taking into account the hundreds of thousands who have been able to keep paying by the skin of their teeth but are now experiencing real difficulty. There is a serious correction going on at present across both the residential and commercial markets in Ireland and further afield and this will continue.

I have found in my life to date that people generally react better and prefer to be told the truth, however hard that truth may be in 1995, I saw no amount of lawyers who promised me the world. Some promised me imminent release; others suggested I might only spend six months in jail. Many professionals only tell you what they think you want to hear. It’s a great way to make a sale and has worked for them for years.
The fact of the matter in Ireland right now is that the banks are in a particularly bad state. Their balance sheets are massively impaired and the IMF and Central bank only this year have told them to address the situation. This is only now beginning to happen. Make no mistake about it, the debt problem in Ireland is largely property related and as a consequence more houses will be coming to the market as the Banks seek to address their balance sheet deficiencies.

Every week in our Dublin office we are seeing more and more people come through the door that have significant borrowings in a serious state of negative equity looking for solutions.  One solution would be for the banks to offer all of their customers a new 15 year facility at a repayment level that works for the borrower, and hopefully ride out this storm over the next five or six years.  Dare I say if this was an option for people the borrowers would snap their hands off.  The very frustrating nature of the country’s current problems is that people borrowed long term money and because there has been a material change in the markets, the banks have called the loans in now, which has completely distorted the economy and left the country on life support.

Over the next twelve to twenty four months there will be thousands of houses come to the market across the country and my view is that prices will soften further up to 20%.  In fact Moody’s have already stated in March of this year that this is what they expect to happen in Ireland.   I agree that in the Dublin area there has been good activity in the past twelve months and this has to be welcomed, as everyone wants to see an active housing market; however with what’s around the corner, I would be very cautious with the optimism and words like recovery possibly premature.

Go and speak to people in Galway, Sligo, Cork, and Kildare and throughout the country and explain to them that the housing market is in recovery.  A client of ours only last week sold his beautiful detached home in Galway for €210,000.  The mortgage on the property was €575,000 – does this mean the market is in recovery – depends on your interpretation I suppose, but I certainly wouldn’t be cracking open the champagne if I was in that position.  As the banks are now gearing up to dispose of the stock that is impairing their balance sheets, let’s see how this one plays out, however I would urge caution across the board in the short to medium term.

 

Nick Leeson - GDP Partnership

www.gdpni.ie

A recovery in Ireland..... Really??

Whereever you look at the moment there is conflicting evidence in the economic recovery of Ireland. House prices we are told are showing some signs of recovery, although this is largely based in the prime Dublin locations yet the country as a whole is back in recession. It's very easy to put a positive spin on stories and bring the small positive to the centre of an overwhelmingly negative situation. Economists have been doing it for decades, some like David McWilliams with a touch of flair and accuracy but the majority of them with about as much success as me predicting the future value of the Nikkei 225. They are often aided and abetted by certain strands of the media that are looking for a good story, almost at any costs.

 Personally I think people respond better to being told the truth rather than being led down the garden path. It is easy to be fooled though. There is a lot of property being sold at the moment, typically it is large lot sales to either very wealthy individuals or large funds that are specifically set up to look for distressed assets that can be turned around. Even financial traders from the bond markets are getting involved, buying a loan book from one of the newly nationalised banks often has a far greater return than anything they can access in their own trading markets. The debt is considered as good as the government and for some there is a profitable play to be had. Whilst the state of the economy is part of the information used to make a decision, the focus is solely on how much money can be made.

 All markets are efficient. The stock market is an exceptionally efficient vehicle. It has bull runs as it races higher and bear stages as it collapses back to normally. It can be over bought or over sold but is always waiting for a correction back to normal levels. The property market is no different, the depth and length of the correction is directly correlated to the extent to which it was overbought. Japan, unfortunately became the poster child for an economy and property market that became the most overheated of modern times. The decades that followed saw deflation, stagnation, currency speculation and consistent economic uncertainty. It is only now, over twenty years on that they are truly seeing signs of turning the corner.

 Why would Ireland be any different. Its a far smaller nation and the correction phase should be easier but there is no way that we are at the bottom yet. The investors mentioned above would agree, they're not interested in picking bottoms in the market, they're only interested in looking at yields versus the cost of carry of the money and what can be achieved elsewhere. If a purchase ticks all of those boxes it will be done, if not it simply won't happen.

There are three phenomenons still to hit the Irish property market, all with negative effect.  Many of the buy to let investments that are in negative equity, all the consensual sales that distressed borrowers have to engage in and all the repossessions that are starting to increase in numbers have to come to the market. It is as simple a case of supply and demand that you will ever see. As more residential property makes its way onto the market, the prices have to fall. Interestingly I have the benefit of working in Northern Ireland over the past twelve months and the observations I would have is what has occurred in that market is now happening in the Republic.

I don't know what its like where you live but in Galway the 'For Sale' signs are popping up everywhere. Gone are the dilapidated signs that have been there for the last four years, mildewed and overgrown with weeds. The new signs are all bold colours and sparkling clean and announcing that there is business to be done. But its not nice business is it. Most are distressed sales, properties where receivers have been appointed or a series of investments that have seen the borrower lose almost everything. It certainly goes against the psyche of the Irish nation. Repossessions have never really been part of the home-owning process but they are now a real and present danger. One hundred and sixty homes were repossessed in the first three months of this year. On its own it doesn't seem like too big a number but its a significant increase on previous months. Add in those properties that have been sold with the consent of the borrower and lender and the number would be significantly higher.

The only ones really benefiting are the estate agents, they had a great time during the boom and for those who survived the initial years of the gloom, its not too bad now either! They provided you with mortgage solutions when you were looking to buy the property. Now that you are down on your knees they are looking to find you a buyer for that very same house at a fraction of the price. It was and is a fee fest, whether you are a solicitor, accountant, insolvency practitioner or estate agent, you get paid whatever the situation. The very real danger is that they are not always acting as aggressively as they should in the interest of those in difficulty. All have a huge interest in staying 'on side' with the banks, after all that is where the majority of their work is coming and will continue to come from for the next five years in this country.

The new Insolvency legislation will advance this sale process further but only if bought into by the banks will we see a re-basing of household debt in Ireland. The problem though is that the banks will retain the say in most applications to the courts and unless they are coerced into the process by the regulators or Central Bank, it will not work. For now though, with repossessions on the increase, it is more important than ever that you stay engaged with your lender and seek good independent advice.  The idea of holding onto your property portfolio if it is in negative equity, simply will not be allowed to happen.  As time moves on and interest rates rise which will happen at some point, the pain threshold will increase yet again – not a nice thought really for everyone.

Banks and Provisions - One huge Black hole!

Over the past few weeks its become clearly obvious that many of our banks in Ireland are really struggling to work out how to deal with the ongoing property market collapse and banking crisis. Most at this stage have employed their own internal property, planning and accountancy professionals to gain a better understanding of where things are possibly heading, however their overall plan seems more and more flawed as each day passes.

 The reality in Ireland is that there is no bank lending going on, there won't be any lending in the short to medium term and banks are getting smaller, closing down branches all over the place. What does that tell us ? Well one thing it does tell us is that money is scarce and lending a thing of the past.

Today in Ireland apart from one of the banks who have told everyone they are exiting the country, and are taking a very commercial position regarding winding down their book, the rest are really struggling to work out how best to deal with the problems they face. Most are obsessed with putting their customers who on many occasions they lent the money willy nilly in years gone by through hoop after hoop after hoop. A trend of very late is that some of the banks are refusing to take offers which have been made on the properties, with the reason being, -- we have that on our books at a higher value!!!! So let me get to the point on that very note.

 

Provisions.... "A balance sheet item representing funds set aside by the bank to pay for losses that are anticipated to occur in the future. The actual losses for the earmarked funds have not yet occurred, but the general provisions account is counted as an asset on the balance sheet. For banks, a general provision is considered to be supplementary capital under the first Basel Accord." 

So generally banks are minded to not sell any property that does not fall within their provision threshold which is understandable - therein lies the problem and big problem I would suggest.  If an offer comes in lower than what the bank have provisioned for then they are inclined to knock back the offers. Very simply if the banks are doing their jobs correctly and valuations accurate, then the provisions on the loans would all in line with where the market really is, so when the customer tries to sell the property on the open market and an offer comes in on the property, the bank would be inclined to accept the bid right? Wrong actually.  The major issue affecting banks in Ireland today and becoming more and more evident is that the banks are not strong enough to take the losses that are heading their direction as a result of the property collapse and they're own provisions on the toxic loans are ambitious to say the least.  This is a huge problem and as the property market continues to fall for different reasons, the problems for the banks will continue to intensify  - in fact its the banks worst nightmare.  Recently the Financial Times reported that the British banks are looking at a £40billion black hole in their balance sheers  fro this very reason and to be honest, its looking more likely that there is a significant black hole on the balance sheets of the Irish banks - its just no one knows the extent of it which is worrying!

In 1998 I qualified in Estate Management and the definition of market value back then was; "

 

Market value is the price at which an asset would trade in a competitive auction setting price after an accepted marketing period."....  15 years later and this definition remains the same - in fact, It has never changed. So when a banker tells me that they are not prepared to accept the offer for an asset which has been on the market and marketed fully for an acceptable period of time, I know that they simply have not provisioned properly for that property loan.  The issue then being that in 18 months time the market value in a depressed marketplace will be less than that of today- a never ending spiral.

You see I understand property, I have been qualified for quite some time, I understand the markets and understand the risks. The issue is the people you speak to in the banks often do not have the same level of understanding and the decisions being made at credit level often do not make any commercial sense and it seems that they are gambling on the market returning to some kind of normality or in some cases it would appear they haven't really given their decision much thought at all.

The property market will continue to flounder along the seabed in Ireland for the next 5-10 years, in fact until credit returns.  Banks need to smell the coffee and sort themselves out, get their provisions in order and stop trying to dictate to the market what Market value is. If they continue on their current policy they're will only be one outcome for them all - more pain and potentially a fatal end to their business affairs on this island. 

 

 Conor Devine MRICS

 

 

When will Housing Market Return in Ireland?

I read over the weekend in the Sunday Independent, an excellent publication in my view an article whereby the journalist asked 6 economic and property experts when they thought the housing market in ROI would improve. I read with interest the thoughts of these people as its certainly a topical debate in Ireland right now. Interestingly enough the first 3 experts reckoned the housing market would start to turn the corner in the next 12 months, yes that's 2014. The remaining three thought between 3-6 years.

To answer a question like this i believe it would be prudent to look at what has happened up the road in Northern Ireland, a different jurisdiction however NI has suffered just as much as ROI from an economic point of view regarding the banking crisis and property crash.

It is worth noting that the banks in the North over the last 2 years have taken a firmer approach on defaulters and generally are going through their mortgage books with intent and a more aggressive nature. The net result of this is that the supply of housing stock has dramatically increased resulting in house prices falling through the floor. In fact last night i looked at the Colliers auction coming up in Belfast in the next two weeks and notably you will be able to pick houses up for as little as £15-£20k throughout the country - startling!!

In Belfast since 2012 ,investment buy to let properties have been making as little as £30k in the auction room and the same properties will comfortably return £350 per month. The yield on this kit is generally between 7-10% - not a bad return, much better than a toxic banks impotent 1%. This trend in NI will continue in my view until the banks get their balance sheets in some sort of order and i would suggest a minimum 3 years from now for this to be within reach.

 

OK so I've set the scene - so what have the ROI banks been up to in the past 2 years whilst their friends in Belfast have been working through their problems - emmm...... Not much to be honest. Facts remain that the banks in ROI have waited to the turn of 2013 to waken up and take action regarding the mortgage problem facing them and the country.
GDP has been working in the debt advisory business in NI since 2010 and are well up to speed with where banks are and their policies. We have been working with distressed borrowers in ROI since 2012 and in January of this year we opened our Dublin office and since then have been swamped with people and SME's who are completely overwhelmed with debt. An observation would be that the banks in NI are about 18 months ahead of their southern counterparts in terms of dealing with the debt. We have seen in NI thousands of properties literally come to the market in the past two years and largely house prices have torpedoed as a result.
In 2002 i did a parachute jump onto the loveliest beach in Byron Bay Australia and i think house prices in N Ireland is the only thing to match the speed at which i was travelling towards the floor on that occasion as exhilarating as it was!!.

Considering the above, where are we with the housing market in ROI? OK so yes Dublin will be the least effected and if there is any stability at all in ROI, for obvious reasons it will be around the Capital. However for the rest of the country, i wouldn't be putting the kettle on for a recovery anytime soon.

I listened and watched with interest a Prime Time debate in January on RTE with what seemed to be a handpicked audience of very positive professionals and "industry experts" discussing the fact that they believed and were seeing the evidence of a recovery on the go or in their words "Green Shoots". Consequently on "Q" the very next day "Moody's" credit agency released a report stating that house prices in Ireland to soften another 20% in 2013 - such a contrast. If i was a betting man id have 50cent on Moody's forecasts.

OK so let me get off the fence. There is likely thousands of buy to let property and other housing stock coming to the market through banks in the next three years in ROI. My view off the back of my GCSE economic schooling is that when supply increases, prices normally soften.

Facts are that the Irish banking sector is under water, has been dragged up towards the shallow end, which is still too deep to stand up unaided. The housing market will continue to soften until the banks sort themselves out and also start lending again. i have a great imagination trust me, but this is not going to happen in 2014. The banks decision to sit on their hands will come back to haunt them. Some say they were waiting to the new insolvency bill was passed before they started to move. Well if that's the case then fine but lets be honest a piece of legislation that's created to punish people is hardly going to be a game changer for anyone. What a missed opportunity that was. 

One thing that is for sure is that there will be no recovery in Ireland until the banking sector sorts out the debt overhang. Their is way too much sovereign debt, SME debt and personal debt in the country with little surplus income, resulting in the country being economically on the life support. machine 

Lets hope we all try and contribute what we can to make things better in the long term for all. However hoping for miracles and ignoring the bottom line economic facts is in my view, very unhelpful.

Conor Devine MRICS ~ Principal GDP Partnership Belfast / Dublin

Bankrupt in Ireland - No Thanks

A number of the leading publications in Ireland from time to time continue to run stories highlighting the fact that Irish debtors seem to be continuing to go to another jurisdiction to declare bankruptcy, most notably Northern Ireland, England or Wales.  Some of the articles are written in such a way that the author appears to be in some sort of shock that with the new insolvency legislation now about to be launched in Ireland why would people still want to do this.  In fact I have listened to so called financial experts in the Irish press and on television and radio over the past few months, and it seems that they too seem to misunderstand the new legislation.
Let me be very clear - the new insolvency legislation will do little to stem the race across the Irish sea or into Northern Ireland to resolve the personal debt crisis facing the country.  The new law which has been drafted to air on the side of the banks is designed to punish people, and if you do this, well - would it not be reasonable to assume that many will decide to put the two fingers up at it and take measures into their own hands - I think so.

It has been leaked in the past few weeks that the banks themselves had some influence in the drafting of this legislation, and to be frank having been working in this industry for quite some time now, I am not surprised to hear this and when you see the papers, its clear they likely had some influence over the documentation. The bottom line is though, its not going to work.  If you are seriously expecting people to live on beans and toast sorry just beans for six years, well then I am sorry it wont work.  If you give the bank a veto on the arrangement, well its unlikely people will fall for that one either.  The facts are that the new bankruptcy law will bar you from being a director in a company for 3 years and ....if you have any chance of making a few euros after that there maybe a five year claw back. 
Take the scenario whereby you have a pretty sharp young entrepreneur who has 6 buy to let properties and a good SME business with lots of potential.  He is studying the new legislation with the help of an advisor trying to work out what his best options would be, to move on with his life. If he stays in Ireland, well there is a good chance it may take him 8/9 years to deal with his debt.  If he decides to go to NI or England - 12 months.  Question? Where is that guy going to want to resolve his debt problem? Well the droves of people we are seeing in GDP Partnership in our Dublin office are telling us that they will be moving to England or up to NI for a period as they just are not prepared to put their life on hold for up to 10 years in the Republic of Ireland - and to be fair who would argue with them.  This has to be a huge problem for the country as a whole as the one opportunity the government had recently of devising a bill that would work for everyone, is actually making people take the law into their own hands and go to another jurisdiction - a sensational failure!

A few months ago a BBC journalist described Ireland as Europe's only remaining open air debtors prison  - well that's one way to look at it and I would certainly agree with this to a large extent. The majority of the banks are obsessed with putting borrowers through the mangle several times, dragging their heels regarding the personal debt issues and SME's are going through a slow death as they are swamped with bad debt that will never be repaid.  We see all sorts of confusing reports recently of green shoots for Ireland and reduction in unemployment only last week - what the figures didn't say was that unemployment maybe fell slightly but it was as a result of part time jobs increasing.  The trend for people on part time contracts is that they don't spend, hence no real benefit for the economy - so the wheel goes round and round.

Tourism bankruptcy will continue to be a very real choice for people living in the Republic of Ireland and to be quite honest there is very little anyone can do about it.  Its unfortunate that the government in their wisdom didn't duplicate (or design something that resembles it) the insolvency legislation that works quite well in the UK and NI, as this would have sent out certainly a more positive message to the borrowers themselves. 

Most notably I read with interest at the weekend the USA is now starting to pull back out of recession and jobs are increasing and even the housing market is picking up.  How can this be?  The reason is that the government took strong decisions three years ago and had the gumption to stick to their resolve and now are getting the rewards. Oh yes and the USA banks deal very aggressively with bad debt writing it down and starting again - more or less!! Go to the opposite end of the spectrum and you will see the Irish government model, which is floating in thin air, economy awash with debt, it's airports full of young talented professionals with one way tickets to far away fields,  and those left behind in the country emotionally if not financially bankrupt and struggling to see the wood from the trees. As the band D-REAM hit record suggests.... Things can only get better!

Autrhor Conor Devine MRICS : Principle of GDP Partnership