Ireland Reels From Housing Crash
MICHELE NORRIS, host:
It all started with a spectacular boom. People used their wealth to buy expensive houses, convinced property prices would keep rising. They didn't. Now many find themselves saddled with homes they can't afford to keep and they can't sell them either. Sound familiar? Well, instead of the U.S., I'm talking about Ireland, as NPR's Rob Gifford reports.
ROB GIFFORD: Twenty-nine-year-old Kian Burgess(ph) is typical of hundreds of thousands of Irish men and women who bought property during the boom years of the Celtic Tiger.
Mr. KIAN BURGESS: I was renting - invited to move home with me mom and me two sisters. I said, no, I have to buy a house or I buy an apartment.
GIFFORD: Afraid he would miss out as the market went up and up, Burgess jumped in and bought a one-bedroom apartment for the equivalent of $300,000 at the height of boom, in 2006. He said there were people lining up around the block to buy in his building.
Mr. BURGESS: Suppose it was the marketing efforts of the developers that's kind of drove us all to buy, jump on the bandwagon, here we go. The whole country is kind of - the economy was good, you know, we didn't foresee the economy going down as much as it has, and even the best economists in Ireland didn't even foresee the downturn would take such a dive.
GIFFORD: The downturn has led to his $300,000 apartment losing about a third of its value. And that's happening all over Ireland. The rise in Dublin house prices pushed people out into smaller towns around the capital - places like Longford, which just 10 years ago, was a tiny village. Developers, spurred on by huge tax incentives for housing construction from the government, built thousands of shiny, new houses in Longford and surrounding towns. Few people here want to discuss the housing collapse. But one man who does is 45-year-old David Clohey(ph), who moved back here three years ago after a decade living in Holland.
Mr. DAVID CLOHEY: Now, there are actually small housing developments if you were to go five miles in any direction, with 20 or 30 houses on them totally boarded up. They're empty. Developments have been stopped. There's supposed to be another 250 houses here - that'll never happen.
GIFFORD: There's a huge, new shopping mall in the center of Longford that wouldn't look out of place in the center of Dublin - or, frankly, London or New York. But it stands completely empty. Clohey himself has not had a great year. He lost his job. But he says at least he's one of the few who didn't get sucked into buying a house. He says his neighbors who did buy houses for about 250,000 Euros are looking at a long wait if they want get their money back on the properties, now worth just 150,000.
Mr. CLOHEY: If you achieve growth over the next year of 4 percent, which no one's going to achieve, how long do those 4 percents on 150,000 take to add back up to 250,000? It is between 12 and 20 years.
GIFFORD: And that's optimistic, he says. Kathy Sheridan is a journalist at the Irish Times, who's written a book called "The Builders," about the developers who drove the housing boom. She says Ireland has been harder hit than most countries because there are a fewer checks and balances on the unholy alliances the builders forged with politicians.
Ms. KATHY SHERIDAN (Journalist, The Irish Times; Author, "The Builders"): It's part of our charm, I know, in Ireland that we know one another so well. But it's also a huge difficulty when it comes to, say, challenging the bank's culture. Calling those guys to order has been a huge problem because they have had access to government ministers.
GIFFORD: Ireland, like the U.S., had plenty of other economic problems. But, says Sheridan, it was really the housing bubble that brought down the whole economy. Sheridan says like much of the world, Ireland just needs to get back to basics.
Ms. SHERIDAN: The best guess is that property is responsible for half of our problem. It is absolutely central. And the problem is that, of course, in our enthusiasm for property, we forgot a very important lesson we should've learned many years ago, which is that for a small, open market such as Ireland's, our whole existence basically depends on competitiveness and exports.
GIFFORD: After so many years of poverty, the Irish admit they simply got carried away by the belief that property values would always increase. The collapse of the Celtic Tiger, and especially of the housing bubble, has been a painful reality check here. From the wreckage, though, everyone says they're determined to rebuild a more stable, balanced economy.
Rob Gifford, NPR News, Dublin.
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