Jump to content
House Price Crash Forum
Sign in to follow this  
Dave Beans

Ghost Estates And Broken Lives: The Human Cost Of The Irish Crash

Recommended Posts

http://www.independent.co.uk/news/world/europe/ghost-estates-and-broken-lives-the-human-cost-of-the-irish-crash-2136104.html

hey stand empty across Ireland: 300,000 unoccupied homes, a silent reproach to those who built them believing that the country's economic boom would never end. As Europe's finance ministers laboured in vain to reach an agreement on how to ease Ireland's economic misery last night, the so-called ghost estates were an awful reminder that the "survival crisis" the politicians were warning was under way had already hit ordinary people.

Dave O'Hara was one of those who bought into the "Celtic Tiger" at the beginning of the decade, eschewing a seven-generation family tradition of carving headstones in favour of a piece of the country's building boom. He founded a firm that constructed bespoke windows and doors for the thousands of upscale homes being built. The firm grew into a multimillion-euro enterprise, until the recession – and the collapse of the building industry – hit in September 2008.

Now his company is in liquidation, and Mr O'Hara, 41, who has one child, is on the dole. He owes the Bank of Scotland more than ¤1m (£850,000).

Like many others, Mr O'Hara's anger is aimed at the banks, which have already been bailed out and seem destined to force the government to seek further help of some kind from Ireland's European partners. "Everyone is responsible for their own actions, but the burden is being brought to bear on the people on the end of the line. In Ireland right now, it's better to owe ¤50m than ¤50,000. The people who have sinned the most are suffering the least," he said, sitting in his cottage along the borderlands between Leitrim and Sligo, in the boggy north-west of the country. "I don't know what's coming, but I know what we've got isn't going to stay. I've lost all faith and confidence in our system."

Not far from Mr O'Hara's home, the "ghost estates" are well-known eyesores along the rugged landscape. And the crisis that created them has hit not just the people who built them, but those who might once have expected to move in, as well. Hundreds of thousands of homeowners have already found themselves saddled with negative equity as a result of the crash, economists estimate, with as many as one in seven families affected.

The toxic combination of the glut of house-building during Ireland's boom and the current dearth in demand means they have been lumbered with a property worth less than the loan they secured to buy it.

Personal indebtedness is also an issue, as are redundancy and the end of easy loans, meaning around 100,000 households are struggling to make regular repayments on the money they owe. And yet, house prices continue to fall precipitously. Together with slumping disposable incomes due to frozen wages and stubbornly high unemployment, still running at more than one in every eight adults of working age, many fear a social disaster is unfolding.

Even for the few who have yet to feel the pinch from the crisis, its effects on families will be felt next week, when the Budget that was brought forward yesterday yanks a further ¤15bn out of the economy through major spending cuts and tax rises.

Many have taken drastic action already. With youth unemployment topping 30 per cent, some have already fled abroad to seek their fortune, or at least stay above the breadline.

The Economic and Social Research Institute think-tank estimates that the labour market will not pick up within the next two years, pushing as many as 100,000 people to seek work abroad. In a country of just 4.5 million, that would cause a dent in potential consumer spending, as well as a level of emigration-fuelled social upheaval reminiscent of the 1980s and after the Second World War. In Dublin, ministers were maintaining a tough-talking stance, refusing to go cap-in-hand to the EU even as discussions were continuing in Brussels. There was a not-so-subtle resentment in the capital that a growing number of European players were insisting a bailout was the best option. Yesterday, Jean-Claude Juncker, the Luxembourg politician leading the group of euro-area finance ministers, said help was there if it was wanted.

There must be a bitter irony in it all for Mr O'Hara. While the Irish government is working hard to avoid calling on the ample help on offer, he continues to struggle. However, he is opposed to Ireland opting for an embarrassing bailout.

"I use be to be pro-European," he said. "But my feeling now is that the solution can't come from Europe. It's akin to giving a credit card to a family already massively in debt. I think the banks need to collapse."

There are some who now want their leaders to swallow their pride and take the help on offer, however humiliating. "Maybe a bailout isn't such an bad thing," said Jackie McKenna, a sculptor in Manorhamilton, Co Leitrim. "It wouldn't be the end of the world. If we don't we won't get out of this. Something needs to be done. Businesses are closing and we need to do something."

Despite his plight, Mr O'Hara remains remarkably upbeat. "I'm actually excited for the future," he said, adding that his situation was a "time for reinvention". Now it can no longer rely on its building sector, the Irish economy will also have to undergo a similar, and painful, transformation.

300,000 homes lay empty...ruddy nora..

Share this post


Link to post
Share on other sites

Speaking to a newly qualified dentist a few weeks back , she had come over here to get a job , out of the 36 who qualified with her this year just two had found jobs in Ireland.

Share this post


Link to post
Share on other sites

reading that article, it looks more like, greedy stupid man ruined 200 years of family heritage by personally guaranteeing a load of corporate debt and by not ringfencing the liabilities of the prooperty development company. In other words, he went all out for profit and not for a balanced growth strategy with sufficient eye on risk - a multimillion pound enterprise owner shouldn't be that stupid.

The only human cost in that is the complete lack of common sense and brains shown by Mr O'Hara.

Share this post


Link to post
Share on other sites

reading that article, it looks more like, greedy stupid man ruined 200 years of family heritage by personally guaranteeing a load of corporate debt and by not ringfencing the liabilities of the prooperty development company. In other words, he went all out for profit and not for a balanced growth strategy with sufficient eye on risk - a multimillion pound enterprise owner shouldn't be that stupid.

The only human cost in that is the complete lack of common sense and brains shown by Mr O'Hara.

Yup; agree.

Of course - the FUEL that super-turbo'd the whole process was

LIAR LOANS.

:rolleyes:

Share this post


Link to post
Share on other sites

Yup; agree.

Of course - the FUEL that super-turbo'd the whole process was

LIAR LOANS.

:rolleyes:

:) - from familial anecdotes, the BIGGEST problem, other than non-status lending, secured only against future property values, and certainly for businesses at least was this:

they either took long leases of commercial property - and convinced themselves that a 25 year lease with no break was a brilliant thing as that lease could and would carry a premium - so they were building up equity in it and that they would do it in their own name, or guarantee it

OR

they bought the property, as it would only appreciate - they bought it taxefficiently in their own name, relying on their business income to fund it - and they'd have a massive nestegg to cash in..... those businesses are now in shtuck...... so no cashflow, property value fallen.....

Share this post


Link to post
Share on other sites

reading that article, it looks more like, greedy stupid man ruined 200 years of family heritage by personally guaranteeing a load of corporate debt and by not ringfencing the liabilities of the prooperty development company. In other words, he went all out for profit and not for a balanced growth strategy with sufficient eye on risk - a multimillion pound enterprise owner shouldn't be that stupid.

The only human cost in that is the complete lack of common sense and brains shown by Mr O'Hara.

What if you were a conservative businessman though, one who knew what they were doing, didn;t expand into the browth, didn;t borrow more than you though the long term prospects of the market you operated in, didn;t pay your staff larger salaries easily affordable (for a short while) with more borrowed capital or pay for mega advertising budgets that brougth you all the best work? You'd be at an immediate commercial and financial disadvantage and also still prone to the fallout when the bust came which could still wipe out your business.

This particualr breed of moral hazard comes right from the top, the central banks, the bankers and the policticians - the economy destroying crew.

Share this post


Link to post
Share on other sites

:) - from familial anecdotes, the BIGGEST problem, other than non-status lending, secured only against future property values, and certainly for businesses at least was this:

they either took long leases of commercial property - and convinced themselves that a 25 year lease with no break was a brilliant thing as that lease could and would carry a premium - so they were building up equity in it and that they would do it in their own name, or guarantee it

OR

they bought the property, as it would only appreciate - they bought it taxefficiently in their own name, relying on their business income to fund it - and they'd have a massive nestegg to cash in..... those businesses are now in shtuck...... so no cashflow, property value fallen.....

Id call that Bankrupt.

It was clearly bad lending, bad borrowing, and now they DEMAND they get some Government handout to cover the loss?

Time for a full body scan and enhanced paydown for everyone.

Share this post


Link to post
Share on other sites

What if you were a conservative businessman though, one who knew what they were doing, didn;t expand into the browth, didn;t borrow more than you though the long term prospects of the market you operated in, didn;t pay your staff larger salaries easily affordable (for a short while) with more borrowed capital or pay for mega advertising budgets that brougth you all the best work? You'd be at an immediate commercial and financial disadvantage and also still prone to the fallout when the bust came which could still wipe out your business.

This particualr breed of moral hazard comes right from the top, the central banks, the bankers and the policticians - the economy destroying crew.

The finance was there, at a slightly higher cost (I have professional experience of leveraging and Irish corpfin - having done their biggest take private (and might still be)), but money was very easy. There's nothing wrong with expanding, but it's about ringfencing and making sure that your businesses aren't parasitical or Siamese (one will die if the other does). I get really frustrated with owners who simply don't see down side...

in your example above, if I was prudent, I'd have been making 95% of the money with 10% of the risk (for example) and would certainly be in a position to swallow up lots of businesses and opportunities when I thought the bottom was coming.... - all common sense went out of the window, we are just advisors, what did we know about making money in Ireland - sustainably earning and keeping money, rubbish, this other lot will do the job for a bit less and will tell us what we want to hear...... :)

Share this post


Link to post
Share on other sites

The finance was there, at a slightly higher cost (I have professional experience of leveraging and Irish corpfin - having done their biggest take private (and might still be)), but money was very easy. There's nothing wrong with expanding, but it's about ringfencing and making sure that your businesses aren't parasitical or Siamese (one will die if the other does). I get really frustrated with owners who simply don't see down side...

in your example above, if I was prudent, I'd have been making 95% of the money with 10% of the risk (for example) and would certainly be in a position to swallow up lots of businesses and opportunities when I thought the bottom was coming.... - all common sense went out of the window, we are just advisors, what did we know about making money in Ireland - sustainably earning and keeping money, rubbish, this other lot will do the job for a bit less and will tell us what we want to hear...... :)

In other words, you KNOW that it will end, therefore you plan not to be the patsy.

sad thing is, Patsy doesnt like paying anymore.

so weak Government feels that it must help.

Share this post


Link to post
Share on other sites

I don't agree with all this 'ring fencing'. It is open to fraud whereby the risks are all on one side.

Property companies even set up separate 'limited liability companies' for individual sites.

I don't even agree with Limited Liability any more. The rich just walk away with the money they borrowed.

Something has to be done. It has gotten out of hand.

blame the lenders.

then arrest any found to have a VI in the deal.

Share this post


Link to post
Share on other sites

I don't agree with all this 'ring fencing'. It is open to fraud whereby the risks are all on one side.

Property companies even set up separate 'limited liability companies' for individual sites.

I don't even agree with Limited Liability any more. The rich just walk away with the money they borrowed.

Something has to be done. It has gotten out of hand.

surely you're not serious ? That's like making your pension fund liable for Tesco and BP. Limited liability is essential for companies - it can and is abused, I don't disagree there, but that should be regulated by the market itself - if someone is a bad risk, then personal guarantees etc. are needed... but if you had blanket unlimited liability, then we'd simply become a nation of non-entities with no investment at all

Share this post


Link to post
Share on other sites

surely you're not serious ? That's like making your pension fund liable for Tesco and BP. Limited liability is essential for companies - it can and is abused, I don't disagree there, but that should be regulated by the market itself - if someone is a bad risk, then personal guarantees etc. are needed... but if you had blanket unlimited liability, then we'd simply become a nation of non-entities with no investment at all

there is no such thing as unlimited liability.

However, many companies seem to be "designed" to fail.

It makes one wonder how bankers, the best of the best, are fooled by all this...specially when lending to each other.

Share this post


Link to post
Share on other sites

Very thought-provoking article. The bust, after the boom.

3 years ago this must have seemed incomprehensible.

Share this post


Link to post
Share on other sites

blame the lenders.

then arrest any found to have a VI in the deal.

Yes, and seize any assets of the banker and the spouse.

Just seize all the assets too, none of this proving that they werent earned legally tosh.

If bankers are made personally liable for any losses occurred on loans, we will get an end to this nonsense.

Share this post


Link to post
Share on other sites

Dave O'Hara was one of those who bought into the "Celtic Tiger" at the beginning of the decade, eschewing a seven-generation family tradition of carving headstones in favour of a piece of the country's building boom. He founded a firm that constructed bespoke windows and doors for the thousands of upscale homes being built. The firm grew into a multimillion-euro enterprise, until the recession – and the collapse of the building industry – hit in September 2008.

Now his company is in liquidation, and Mr O'Hara, 41, who has one child, is on the dole. He owes the Bank of Scotland more than ¤1m (£850,000)

He should have called his company a bank. Banque de Portesfenetres or some suchlike.

But really the banks that loaned the money should have gone down as well.

Edited by billybong

Share this post


Link to post
Share on other sites

Yes, and seize any assets of the banker and the spouse.

Just seize all the assets too, none of this proving that they werent earned legally tosh.

If bankers are made personally liable for any losses occurred on loans, we will get an end to this nonsense.

ridiculous. Utterly ridiculous. You surely can't mean that sort of nonsense.

Share this post


Link to post
Share on other sites

ridiculous. Utterly ridiculous. You surely can't mean that sort of nonsense.

Morave injunctions all round....that would rile them up.

Share this post


Link to post
Share on other sites

Morave injunctions all round....that would rile them up.

Mareva - and it isn't a seizing order, obviously, it's just a non-dealing whilst things are sorted out....

More importantly than spelling though, is that, I fully agree that in the event of fraud, the fraudster (if a banker or lender) should not be able to escape justice, but if you simply apply asset seizing to bad loans, no-one would ever lend except to those that don't need it. Hence it's ridiculous.

Share this post


Link to post
Share on other sites

"I used to be pro-European,' he said.

There's a surprise. Somebody please remind me of just how many billions Ireland had from the EU.

At the height, it was ~£2000 per person per annum. For the UK, that would be ~£140bn. We could abolish income tax and raise NHS spending by 25%...

EDIT: sp

Edited by dryrot

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...
Sign in to follow this  

  • Recently Browsing   0 members

    No registered users viewing this page.

  • 144 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



×
×
  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.