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