Thursday 25 April 2019

Don't count on developers ever paying for this mess

Two categories of homeowners are currently making appearances on court lists. Both have borrowed money they cannot repay.

But it's the ordinary householder, in over his head with a relatively modest bank loan, who faces losing his home. Meanwhile, the property developer, wallowing in debt, looks like being able to continue living in palatial splendour with staff to cosset him against reality.

These erstwhile tycoons seem largely unaffected by the havoc they have wreaked. Indeed, so unrepentant are they about their boom-time escapades, that any suggestion Nama should strip them of assets has prompted threats of further legal action.

They are indignant at the notion they should sell up to pay back some of their debts and move into more humble accommodation.

It's a funny old world.

When the crunch came, it was generally expected the developers would go under. Instead, the banks have gone bust and the taxpayer is keeping them afloat. It turns out many developers are simply too big to be allowed to collapse.

And it's clear they will fight tooth and nail through the courts to hold tight to their luxury homes.

I'd love to be a fly on the wall if a banker tried telling Sean Dunne and his ilk to sell up and move to a three-bed semi in the 'burbs.

By rights, it ought to be a course of action imposed on developers who borrowed hundreds of millions they cannot now repay. But don't bet your house on ever seeing it happen.

Instead we're all now expected to give them a digout. Even if a developer offered the family home as collateral against loans, realistically I can't see any of them downsizing.

A lawyer friend of mine insists "moral pressure" is likely to be brought to bear on them, with or without collateral mortgages.

Nobody wants bankers to start tossing families out on the street, even if the street should be Shrewsbury Road. But my lawyer friend says bankers will soon suggest less opulent accommodation is more appropriate.

I can't see any developers volunteering to do the right thing, though. They will only do what they are legally obliged to do.

Remember how status-driven some of these men are. They put the swagger and strut into the Celtic Tiger. And their interpretation of status does not include a nice little bungalow somewhere near a Luas stop.

This recession is really only beginning to hurt now -- and we're not at the bottom yet. But recession doesn't hit everyone the same.

The hurtling pace of the downturn may have slackened, but the direction in which everything is headed remains a downhill trajectory.

Stories are reaching critical mass about couples losing their jobs, and overnight finding they can no longer meet their mortgage repayments. But selling up is not feasible either, in a property market which most people believe has further to fall.

An elderly Traveller called to my house the other day offering holy pictures in exchange for a donation. She said she needed money to pay the rent, and claimed a Virgin and Child picture would bring good luck to my home.

It has been years since anyone came to the door begging, and its re-emergence is a symptom of the economic collapse. There are numerous others, from permanent sale signs in shops, to special offers in restaurants and cafes, to a rash of empty premises as businesses have gone to the wall.

Unemployment has risen from 4pc to just under 12pc, and an all-time record high of 402,000 signed on the live register in May. Jobless numbers are expected to climb to at least 15pc next year.

Car sales have dropped by two-thirds, the construction industry is at a standstill, tax revenue has collapsed and thousands of graduates are qualifying with no prospect of work. And nowhere to emigrate to.

This is the true human cost of the recession. Yet property developers are not experiencing that. A world of difference exists between feeling the squeeze and being under the cosh.

Selling the helicopter is not in the same league as selling the car you can no longer afford to tax and insure. Cutting back on dining out is not in the same class as cutting back on meals.

Yesterday on the DART, I noticed how most of the office workers were bringing their own lunchtime sandwich with them -- tinfoil glinting in briefcases and handbags. Austerity and frugality are the latest watchwords.

A rash of recession-friendly articles advises us to grow our own vegetables on allotments, or have swap-shop parties where we trade clothes.

It's eye-catching to run a story about how the Ryan family may have to wait years to find a buyer for Tony Ryan's €100m home (currently the second most expensive property on the international market). But a newly unemployed couple struggling to make their mortgage repayments is less newsworthy.

The ranks of the poor, or the nouveau poor if you like, are swelling daily with failed business owners, office workers, estate agents, bank employees and salespeople -- many of them homeowners with pension plans.

Not the usual definition of poor people, in other words.

More of us are falling into debt or dipping into our savings to get by. And that's before the new property tax and other drains on our incomes coming down the track.

Recession is trumpeted as the great leveller, but this isn't strictly true. Owe €1,000 and it's your problem; owe €100m and it's the bank's.

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