|Bargain hunters line up for the property auction at the Shelbourne Hotel in Dublin last week|
All eyes in the country last Friday were on the first mass auction of distressed properties since the bubble burst. The sale of a mixture of over 80 apartments, houses and commercial properties had been widely publicized in recent weeks, with reserves (minimum prices) for the auction pitched at about one-third what the properties had been worth at the peak of the boom.
It was going to be the biggest test of just how far the market had collapsed, the experts said. It would reveal just how far prices had fallen and put a floor under the property market for the future.
The properties were mostly in Dublin but some were down the country, and the main thing they had in common was that almost all of them were being sold by receivers (court appointed administrators) of bust developers or on behalf of broke bank clients, or else they had been repossessed.
The mass auction was held in the biggest function room in one of Dublin's poshest hotels, the Shelbourne on St. Stephens Green.
So many people turned up in search of a bargain that the crowd spilled out onto the pavement and the Gardai (police) arrived to maintain order.
Inside in the auction room there was seating for 350, with standing room for an additional 500. And even with that amount of space people were not able to get in.
All but two of the 82 properties on offer were sold in a few hours, amid frenetic scenes the likes of which have not been witnessed since the height of the property madness here four or five years ago.
The real estate agents involved -- a U.K. company that specializes in handling fire sales of this kind -- said it was so successful they are going to have another one, much bigger, with more properties, in a couple of months.
The event illustrated a few things clearly. One was that, in spite of everything the country has gone through, a lot of Irish people still have not lost their fascination with property as an investment.
Another is that there are still a lot of people here with plenty of cash at their disposal. And their fascination with property borders on the obsessional.
They don't like shares and they don't trust the banks. So if they think prices are low enough they still fall over each other in a rush to buy property.
So were there real bargains to be had?
Well, yes, there were some properties that seemed cheap. One pub, which sold for €3 million in 2005, had a reserve price of just €260,000 and there was a lot of interest as a result. It went for €400,000 in the auction, which seems like a bargain.
But the pub is in Arklow, a town in Wicklow which has lost most of its jobs. And we all know the pub trade in Ireland, especially in small towns like Arklow, has been struggling badly in recent years.
So a bargain? I'm not so sure. If it can't make a profit it's not going to be cheap at €400,000, even if it once sold for €3 million.
Another property that attracted media attention was a studio apartment in Temple Bar, the trendy "Left Bank" area of old Dublin beloved of tourists. It sold for €126,000 (nearly 60% over its reserve price) and during the boom here it would have made more than twice that.
A bargain? Well, maybe. Temple Bar is also a favorite weekend destination for stag parties and younger tourists who want to get the Irish pub experience, listen to diddle d-i music and drink plenty of Guinness.
Which means it's not necessarily the best place to live, and a lot of local apartment dwellers have learned that the hard way. Add in the fact that there are thousands of unsold apartments around Dublin in areas where you don't have to step over the vomit in the morning, and the studio in Temple Bar seems like less of a bargain.
So maybe not all the properties sold last Friday were as much of a bargain as the media suggested. Even so, the mega auction was certainly a ray of hope, however faint, for the property market here.
Real estate agents had tried a similar bumper property auction here in April of last year and only six of the 70 properties being sold that day found buyers. So last Friday did show that confidence is starting to return.
Because of the variety of properties being sold and the fact that they were a mix of commercial and domestic, of houses and apartments, it's hard to be definitive about what it told us about the market. Looking across the auction results, I think it would be fair to say that it suggests that prices in general are now just under half what they were at the peak.
For example, a few properties last Friday were houses in Dublin 14, around the mature Churchtown area.
This area was never as expensive as Dublin 4 or the costal strip on the south side of the city. But it's a solid middle-class family area with good facilities and was always a desirable place to live.
Last Friday four houses in the area sold at the mega auction for prices in the €400,000 to €500,000 range, or just under half what they were making during the boom.
Local real estate agents say that these prices are very close to what similar houses in the Dublin 14 area have been making in recent months. So it seems, for the moment, that is where the floor is in the market.
Using the established Churchtown suburb as a guide, we're down between 50% and 60% from the top of the market about four years ago. That's what the real estate agents want to think. And that's what the few people who have been buying property want to believe.
They want to believe we have now reached the floor and that things won't get any worse. But I'm not so sure.
And the reason I'm not so sure has to do with a few rather bemused people who walked past the crowd outside the Shelbourne last Friday.
They were none other than the now famous Ajai Chopra and his mates from the International Monetary Fund and the EU who were in town last week for the first inspection of the Irish government's books to monitor our progress in cutting state spending to meet the targets that were agreed when we got the bailout money.
The Shelbourne happens to be close both to Government Buildings and to the luxury hotel our IMF/EU masters stay in. So it was not that surprising that Ajai and his chums happened to stroll past.
What they thought of the renewed outbreak of property fever can only be guessed. Their expressions caught on camera are of mild embarrassment, as though they had stumbled across something they would rather not have seen.
Whatever they thought of the shenanigans in the Shelbourne, they seem to have been less than impressed with the Irish government. They issued a bland statement saying they were pleased that Ireland had met all conditions for the loan in the first three months since we got the bailout cash.
But this did not fool anyone. The fact is that last year the bill for the state payroll here was €18.8 billion, which was 60% of our total €31 billion euro tax revenues. This was up from 37% of tax revenues in 2007.
What’s happened is that tax revenue has collapsed since then but state pay has continued to increase. Now you don’t have to be an economist to see that this can’t go on, particularly now that we have huge interest bills to pay on the bailout and bank rescue.
Little or no progress has been made in reducing this state worker pay bill beyond the small adjustments that happened a year ago. Instead the government has been sticking with the ludicrous Croke Park agreement under which the unions were guaranteed a year ago there would be no further cuts in pay for state workers until 2014, on the basis of increased productivity.
This has turned out to be a joke, with no measurable increase in productivity over the past year even though the Croke Park deal was supposed to deliver real change in the public service fast.
Instead we have had more revelations about long holidays, inefficiency, poor service and so on … and of course despite the small cuts a year ago state workers are still earning far more than their counterparts in the real economy, and have guaranteed jobs for life and generous pensions that private sector workers can only dream of.
The fact is that NO progress on the state sector pay bill has been made in the three months since we got the bailout. And you can be sure that Ajai and his hit-men pointed this out to the new government behind the closed doors of Government Buildings.
Which may explain why there were three cabinet meetings in four days last week. And why the minister in charge of the public service made a tough statement saying that the public service was “not fit for purpose” and that we needed a service that was “leaner, more efficient etc.”
No doubt all this was for the benefit of our IMF and EU masters to give the impression that the new government has got the message. But talk is cheap.
Getting real change is going to be very difficult, particularly now that Labor, which depends heavily on the public sector unions, is part of the government.