Hyperinflation in the Irish property market

[This dates back to a time, in the late 1990s, when I wrote a monthly column for theNewfoundland Telegram about connections between Ireland and Newfoundland, where I had been brought up for a while and visited a number of times since.]

Our wonderfully unaffected president, Her Excellency, Mary McAleese, on her most recent official visit to the United States, carried with her a very important message about Celtic Tiger Ireland. She told of the social dangers concomitant with a roaring economy, expressing deep concern about the development of a two-speed society, one group storming ahead, rolling in dough, while another lags horribly behind, hampered by poverty and social disadvantage.

“A vibrant modern economy is not necessarily a healthy one if large sections of its citizens are experiencing exclusion and inequality,” is how she put it.

My blushing wife and I are among the fortunate. We both have good jobs. We are in a position to save for the future when, finally, we get around to thinking about it. We were even able to buy some shares in the recently privatized national telecom company. We can ‘get away’ every now and again to take stock of our lives, and recover from the proverbial slings and arrows.

The roughest aspect of the Celtic Tiger that Sinéad and I are experiencing directly is the hyperinflation in the Irish property market.

The first thing to understand about property in Ireland is that, unlike most other Europeans, the Irish simply must own their own houses. Rental is not a long-term option, and apartments are considered unsuitable as family abodes. Home ownership here is around 80 per cent, as compared to the EU average of 56 per cent. Couples like Sinéad and I are expected to own, typically, a nice, three-bed roomed house, with a small, immature garden … which I mow every Sunday and Sinéad plants on weekday evenings. (Not!)

So far we haven’t been able to live up to those ideals, or our own ones centring on the artisan cottage that we would do up in impeccable taste room by room. Instead, we rent a little, one-bed roomed apartment on the coast – ‘round the bay’ as it were, 20 minutes south of the city. It costs us IR£650/CA$1300 a month. We’ve been eager to find something bigger, especially since wedding presents have begun to clutter every inch of every room ( - all two of them!). And it’s not from lack of effort that we have failed.

It’s not really money either. Money is dirt cheap in Ireland these days; borrowing could hardly be easier, with interest rates as low as 3.8%. Banks and other financial institutes are falling over themselves in a race to procure new business, desperate to “help out”, and contravening many official lending guidelines in order to be the ones to finance your dream home.

But no matter how willing the banks are to stretch their calculations they just can’t keep up with Dublin property prices. The average three-bedroom, semi-detached house in traditional residential areas of the city now cost around IR£300,000/CA$607,000. As a result, first-time buyers, such as ourselves, are forced to settle for satellite lifestyles in out-of-town locations.

Even there, sometimes over an hour’s drive from the Dublin, prices are prohibitively high. Sinéad and I are looking at a new house in a brand new development about an hour from the city. It’s so new, in fact, you might more accurately call it a building site. If we go for it, our house won’t be ready until April 2000. In the meantime we have to come up with IR135,000/CA$273,000. What could I get for that in Newfoundland? Offers on a postcard, please.

The temptation for me, as ever, is to follow Yeats to his Lake Isle of Inishfree and build something cozy from clay and wattles. Another option would be to run for President and take over that wonderful presidential mansion in Phoenix Park.

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