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The Role of the Light-Touch Regulation of the Mortgage Lending System on the Irish Property Markets

Housing Sector ii

Housing Sector iv

ABSTRACT

This research study is an attempt to study the role the light-touch regulation of the mortgage lending system on the Irish property markets. The global recession had left Ireland in a crisis

of high fiscal deficits that had been brought on by low growth, high inflation, high unemployment and high interest rates in particular, with the added pressure of general low levels of income. The increase in demand for housing not only led to a spike in housing development, but also an increase in property prices. This research study adopted a qualitative method of research for the purpose of meeting the aim and objectives of this dissertation. The housing prices in the housing sector of Ireland started to increase during the period 1997-2002, in comparison to the years from 1990 to 1996.

TABLE OF CONTENTS

ACKNOWLEDGEMENT .............................................................Error! Bookmark not defined. DECLARATION ...........................................................................Error! Bookmark not defined.

ABSTRACT ...................................................................................Error! Bookmark not defined. CHAPTER 01: INTRODUCTION ................................................Error! Bookmark not defined. 1.1 Background of the Study ...................................................Error! Bookmark not defined. 1.2 Purpose of the Study .........................................................Error! Bookmark not defined. 1. 3 Research Question ...........................................................Error! Bookmark not defined. 1.4 Aim ....................................................................................Error! Bookmark not defined. 1.5 Objectives .........................................................................Error! Bookmark not defined. 1.6 Dissertation Outline .........................................................Error! Bookmark not defined. CHAPTER 02: LITERATURE REVIEW .................................................................................... 10 2.1 Introduction ......................................................................Error! Bookmark not defined. 2.2 Ireland 1970-1990 ............................................................Error! Bookmark not defined. 2.3 The Celtic Tiger ............................................................................................................... 15 2.3.1 Mortgage Availability ........................................................................................... 17 2.3.2 Property Prices and Output .................................................................................. 18 2.4 The Irish Property Collapse ............................................................................................ 19 2.4. 1 Causes of the Property Collapse .......................................................................... 21 2.5 State Regulation and the Property Market ...................................................................... 24 2.6 Light-touch Regulation .................................................................................................... 26 2.6.1 Fiscal policies ........................................................Error! Bookmark not defined. 2.6.2 Monetary Policy .....................................................Error! Bookmark not defined. 2.6.3 Planning Policies .................................................................................................. 35 2.6.4 Responses to the collapse .......................................Error! Bookmark not defined. CHAPTER 03: RESEARCH METHODOLOGY ........................................................................ 39 3.1 Introduction ..................................................................................................................... 39 3.2 Data Collection Types ......................................................Error! Bookmark not defined. 3.3 Overview of the Research Approaches: Quantitative and Qualitative............................ 41 3.4 Research Method ............................................................................................................. 42

3.5 Justification of the Research Method .............................................................................. 42 3.6 Sample ..............................................................................Error! Bookmark not defined. 3.7 Ethical Considerations .....................................................Error! Bookmark not defined. 3.8 Limitations ........................................................................Error! Bookmark not defined. 3.9 Conclusion ....................................................................................................................... 44 CHAPTER 04: ANALYSIS AND DISCUSSION ........................Error! Bookmark not defined. 4.1 Introduction ......................................................................Error! Bookmark not defined. 4.2. Overview of the Property Market in Ireland ...................Error! Bookmark not defined. 4.3 Limitations ....................................................................................................................... 47 4.4 Interview Analysis............................................................................................................ 47 CHAPTER 05: CONCLUSION AND RECOMMENDATIONS ................................................ 51 5.1 Recommendations ............................................................................................................ 53 5.2 Recommendations for Future Research .......................................................................... 53 REFERENCES ............................................................................................................................. 55 APPENDICES .............................................................................................................................. 61 Appendix 1 ............................................................................................................................ 61 Appendix 2 ............................................................................................................................ 62 Appendix 3 ............................................................................................................................ 63 Appendix 4 ............................................................................................................................ 64 Appendix 5 ............................................................................................................................ 65 Appendix 6 ............................................................................................................................ 66 Appendix 7 ............................................................................................................................ 67 Appendix 8 ............................................................................................................................ 68 Appendix 9 ............................................................................................................................ 69 Appendix 10 .......................................................................................................................... 70 Appendix 11 .......................................................................................................................... 71

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CHAPTER 01: INTRODUCTION 1.1 Background of the Study Ireland is a prominent modern example of rapid economic growth, prosperity and expansion over

The course of the last two decades has grown from an initially low base in the 1980s after a long and crippling depression, into a thriving EU economy, highlighted most notable by authors such as Robert Kitchen, Honohan, Morgan Kelly and ODonoghue et al. The period between the early 1990s until 2007 had become know as the Celtic Tiger era. And brought major change in Ireland through falling interest and taxation rates, decreasing unemployment, increase in mortgage availability and thus a huge movement towards a residential property boom to which was also triggered by the shift of a growing population (FitzGerald, 2011).Despite the visible changing and growing Ireland seeming structurally sound on paper, vulnerabilities appeared of an over-zealous, and weak planning system, meaning that Ireland had become over-reliant on growing trends and emerging industries such as the property, construction and banking sectors (Forrest and Yip, 2011). Dependence on these industries and their unsustainable rates of construction, lending and inflation has set Ireland on an irreversible trend for disaster, which essentially was compounded by the global economic recession, Key arguments arise therefore as to the role of the Irish government in contributing to this downfall, with suggestions that a lack of co-ordinated regulation and management of the banking sector, construction industry and property market was fundamental in the collapse of the economy and sharp decline in property values.

Housing Sector 9 1.2 Purpose of the Study Based on the background of this study as outlined above, this research aims to examine the role that state regulation has in Ireland with regards to its extent of construction to the current

state of the Irish property market. The analysis of various key areas of governance in Ireland, including focus upon the planning system has been evaluated in order to establish whether there has been a lack of adequate regulation system or light-touch regulation, and whether this has been reflected through property values (Gerlach, 2011). With the Irish property market and its closely related construction industry in a current state of collapse, having a knock-on effect on the wider Irish economy, these issues raise important arguments of current concern. A deeper critical examination of such issues, therefore, have provided a more detailed insight into several areas of important relevance in present day Ireland, where these impacts are on-going, mirrored by much of the European Union. Furthermore, the issues confronted lie at the forefront of current property and real estate issues which are having a key influence upon the functioning global markets and the industry as a whole (Forrest and YIP, 2011).

1.3 Research Question This research study has answered the below mentioned key question. What is the role of the lack of state regulation in the Irish property market and the impact of light-touch regulation on property values.

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1.4 Aim The aim of this research study is to determine the role of the light-touch regulation of the mortgage lending system on the Irish markets

1.5 Objectives In order to meet the aim of this dissertation, the following objectives have been met. 1. To carry out secondary research to define and provide an initial understanding of the Irish property market collapse and state regulation. 2. To undertake in dept secondary research which scrutinises the impact that state regulation has had on Irish property markets and property values. 3. To develop and pilot interview question for primary research collection. 4. To carry out formal primary research via structured face-to-face interviews with Irish property professionals. 5. To critically analyse and evaluate collected primary and secondary data with regards to the research question. 6. To answer the key research question. 1.6 Dissertation Outline Chapter 1 Introduction introducing the topic of the Irish collapse Chapter 2 Literature Review A substantial detailed review of the topic through evaluation of key literature and viewpoints that already exist concerning the Irish property collapse and state regulation, alongside primary research finding

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Chapter 3 - Methodology A detailed description and analysis of the methodological approach to the research has taken along with an indication of associated limitations Chapter 4 - Discussion and Analysis This chapter of the dissertation incorporates the results of the research method that has been adopted for this research study.

Chapter 5 - Conclusion and Recommendations A precise explanation and overview of the key findings, their importance and meaning within this particular realm of research

Housing Sector 12 CHAPTER 02: LITERATURE REVIEW 2.1 Introduction This chapter provides an analytical overview of the existing literature relation to the Irish

property market and the influences of state regulation. An historical overview of the Irish property market is evaluated as well as a number of key events that have formed the Irish property market into what it is in the present day. Furthermore, an initial overview of existing perspectives of the causes of the Irish property collapse are confronted, along with a final examination of the outlook of the Irish property collapse are confronted, along with a final examination of the outlook of the Irish property market and property values with consideration of primary research findings. The literature for this research has been extracted from the electronic libraries, journals, books, articles, etc (Fahey and Maitre 2004.

2.2 Ireland 1970 1990 Ireland has experienced a turbulent history with regards to economic stability and prosperity, most notable of which the potato famine and the great depressions of the early and mid 20th century which had left Ireland flailing as a poor western European state, torn between governments, war and religion. By the 1980s, Ireland went through what was labelled as a severe recession (Kitchen et al. 2010) and acute fiscal crisis (Norris and Coates, 2009), not helped by the global economic downturn that took place throughout the 1970s (Whelan, 2011). Gerlach (2011:1) states: For much of the 1970s and 1980s, the Irish economy was a problem economy

Housing Sector 13 The global recession had left Ireland in a crisis of high fiscal deficits that had been brought on by low growth, high inflation, high unemployment and high interest rates in particular, with the added

pressure of general low levels of income (Gerlach, 2011; Whelan, 2011 & Euro Challenge, 2012). In fact, between the years 1979 and 1985, unemployment had risen to a massive 18.2% from 7.8% previously (See Appendix 1); interest rates were above 12% consistently (See Appendix 2) (Kitchen et al. 2010); and the government had attempted to instigate strict tax measures to stabilise the deficit which were wholly unsuccessful (Whelan, 2011). These elements in combination meant that the economy and markets were highly restricted, including that of the property market which was not able to grow or expand. Norris and Coates (2009) state how the prolonged downturn during this period had resulted in a lack of encouragement for home ownership coupled with a limited availability of lending. Furthermore, local authorities provided the main source of mortgage fianc prior to and throughout this economically challenging period. In fact, in the 1970s, approximately half of mortgage loans were sourced from local authorities, with this fiqure reducing to 25% of new loans in the 1980s (Norris and Winston, 2002:54-55). Lending to lower income home buyers in particular was predominantly a local government sector activity up until the 1980s, and at this time, nonprofits, state subsidised, building societies were providing mortgage to the higher income buyers (Norris and Coates, 2009). Maximum local government mortgages were strictly constrained by government order at around three times borrowers incomes and significantly below average contemporaneous house prices. (Norris and Coates, 2009:6). Housing Sector targeted at the low income home buyers who could not afford these higher interest loans, which in turn resulted in the significantly low housing outputs leading up to the mid-1980s (See Appendix 3) 14

where housing construction was consistently below the EU average. Ireland had initially been the poorest member of the European Economic Community (EEC) After it joined back in 1973, something which continued right through until the late 1980s (Euro Challenge, 2012; Fitsz Gerald, 1999). Indication of this were clear to see through the Irish inflation rates, high unemployment, failed tax austerity measures, a debt-ratio of over 110% (Whelan, 2011) and the fact that around a third of the population was living below the poverty line (Lewis, 2011). However , from this point, a combination of public policy and the benefits of the single market enable Ireland to setup a plan for a more economically sustainable future, moving from a limited and restricted economy, to a broad and modern one (Euro Challenge, 2012). A component of Irelands modern day successes notably resolved around its property market which had grown at an incredible rate over a short period of time between the late 1980s and well into the 2000s. After the significant negative impacts of the downturn, Irish government pursued a period of retrenchment by way of attempting to stabilise and stimulate the economy to prosperity (Fitz Gerald, 1999; Kelly, 2011). Stabilisation was the initial social and political responses to the decades of misfortunes that had left the Irish economy in a lowly position amongst much stronger European economics, with the added emphasis of an almost non-existent property market (Gerlach, 2011; Beblavy and Cobham, 2011).

Housing Sector The most notable measure were introduced during the late 1980s, with the 1987 fiscal adjustment; fiscal consolidation at its heart 9Beblavy and Cobham, 2011; Honohan and

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Walsh, 2002; Gerlach, 2011). These included macroeconomic adjustments such as tax incentivisation and the lossening of corporate and property tax restrictions (Honohan and WALSH, 2002). Furthermore, monetary adjustments were significant; spurred on by the greater flexibility and freedom that the European Single Market which would finally enable Ireland to fully capitalise upon through the application of much lower interest rates and removal of high inflation, so as to investors. (Markusdottir, 2011; Beblavy and Cobham, 2011). The finance Act (1986) was an example of a key fiscal adjustment policy that implemented favourable capital benefits relating in particular to building and refurbishment of commercial premises, and business tax reductions (Norris and Gkartzios, 2011). This was companied with the Urban Renewal Act (1986) Under the Urban Renewal Scheme setup initially to target regeneration of inner-city areas through ten year tax reclamation to developers (Norris and Gkartzios, 2011; Norris and Gkartzios, 2011). A further notable policy that was fundamental to the property markets growth was the Housing Act 1988. This policy enabled subsidisation of private sites through local authority and their offering to low-income Purchasers (Norris and Winston, 2002). OCallaghan (n.d) notes how these were essential for stimulating the Irish property market as well as developing key areas primed for renewal in many of Irelands largest cities with more towns and cities being implemented over time (OCallaghan and Linehan, 2007) (See Appendix 4). They were instrumental in allowing the Irish economy and particularly the property market to breathe and expand.

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Ireland experienced a mass liberalisation of its mortgage market from the late 1980s, which involved the breakup of the building societies oligarchic structure, the entry of the associated banks into the market and the Central Bank took a more view of the banks concentrating on the property market (Waldron, 2011: 7-8) These more favourable measures, in combination, were integral to freeing up a much wider opportunities for generating prosperity through new pro-business platform from which Ireland could build upon. A large part of this was related to the how much wider consumer base of first time buyers and developers within the mortgage market, something that had not been available or as easy to achieve in the past decades of economics difficulties (Waldron, 2011; Markusdottir, 2011). On the back of the perceived successes that these measures would bring, were the already emerging trends that were now pointing towards higher levels of foreign investment, increasing population from immigration; increasing demand and supply in the economy, especially with regards to the for housing 9Waldron, 2011; Honohan and Walsh, 2002).

2.3 The Celtic Tiger Between the period of the early 1990s to 2007, Ireland experienced an economic boom reflecting rapid and unprecedented levels of GDP growth and the success of a number of key industries and sectors (Euro Challenge, 2012; Norris and Coates, 2009). This era has been consistently referred to as the Celtic Tiger, a term coined from the booming Far East economies of the 1980s and 1990s which

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was being mirrored by the fast-paced growth in Ireland several years later (Kirby, 2010). These were labelled as the East Asian Tigers (Marksdttir, 2011). This era reflected a radical change in fortunes brought on much by way of the fiscal changes of the late 1980s (Honohan & Walsh, 2002). in the 1990s Ireland went into a more dynamic phase (Marksdttir, 2011) Essentially the rapid growth of this era was reflected through falling unemployment, falling interest and taxation rates, increased credit availability and also a massive shift towards a housing and construction boom which was also influenced by the rapidly growing population (Forrest and Yip, 2011). Overall, through the 1990s up until 2007, Ireland was experiencing growth in the economy at an average rate of around 7.5%. this average was significantly higher than the EU average and resulted in Ireland becoming one of the most successful economies in the world (Kirby, 2010; Markusdottir, 2011). This was an incredible turnaround considering the position that Ireland was in the years Following Ireland initial membership to the European Community. Ireland had grown from being the 22nd most wealthy economy in 1997 to being the 5th wealth by 2007 by measure of GDP (IMF, 2009; ESRI, 2005), indicating the remarkable positive change that had taken place in Ireland.

The Celtic Tiger years saw a dramatic transformation in social and economic life of a country that had to until the start of the 1990s been a relatively poor, peripheral nation on

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the edge of Europe with a weak indigenous economy and a foreign direct investment sector characterised by low-skilled, branch plant manufacturing. (Kitchen at al. 2010: 5) 2.3.1 Mortgage Availability An important driving component to the property boom in particular was the significant increases in availability of credit. Mortgages had been made far more accessible through agreements Between the government and the banking sector to offer much lower interest rates, thus encouraging a heightened level of private mortgage, particularly for the benefits of developers (Kitchen et al. 2010, Honohan, 2009; Irish Property Council [IPC}, 2011) (See Appendix 5). Honohan points out how in some cases, the confidence in the property market and suggestively the Less regulated access to credit lead to lender not uncommonly offering loans at loanto-value ratios of 100% and beyond (OCallaghan, n.d.). This demonstrated a key reason for the continued expansion of property. It would seem that at this stage almost anyone could obtain a mortgage. This was arguable as much a result of Irelands entry into the Eurozone in 2002, enabling a heightened level of monetary benefits that would give bank greater freedom (Kirby, 2010; IPC, 2011). The expansion in credit was the key driver of the seemingly perpetual upward trajectory of house prices and new housing output in Ireland from the late 1990s (Kelly, 2009) Ouite surprisingly, between years 2002 and 2007, mortgage debt increased from 47.2 billion to 139.8 billion (O Callaghan, n.d) with the average loan averaging 325,000 for investors and 240,000 for first time buyers (Kelly, 2011). This clearly defined the nature of lending that had come Housing Sector 19

to be common in Ireland during the boom years and indicates that key driving contribution that this market was having in Ireland. Furthermore, the growing property sector in conjunction with Irelands entry into the Eurozone meant that there was far more opportunity for overseas banks to broaden their interest in the Irish mortgage market particularly within the retail sector (Regling and Watson, 2010).

2.3.2 Property Prices and Output The ever increasing availability of credit had a huge impact on the residential property market in particular, whereby a broader spectrum of people now had access to mortgages which enabled them to get onto the property ladder more easily than even before. This resulted in a greater demand for property, increased more by the growing Irish population which further drove the levels of property building. With Irelands growing economy, an influx of migrants, particularly from Eastern Europe, were attracted to the prospects of employment particularly in the construction sector, which by 2007 accounted for 13.3% of all employment (Whelan, 2011). Since, the population was increasing therefore, the unemployment decreased for about 10 percent, in the late 1990s, to 4.6 percent in 2007 (OSullivan and Kennedy, n.d.). a consistently low unemployment rate, and a sustained growth in population, fuelled by return migration, immigrants seeking work, and natural increase, that saw the population increase by 16.8% between 1996 and 2006. (Kitchen et al. 2010) This provided an ongoing cycle of immigration, demand for property and output of property. Initially between 1980 and the mid-1990s, house completions had been at an average level of 23,000 houses per year (Malzubris, 2008) (See Appendix 3). This grew gradually to a level of Housing Sector 20

33,725 in 1996 followed almost 50,000 at the turn of the millennium (Norris and Coates, 2009). This then expanded significantly between 2000 and 2006 to a level of almost 93,500 (Whelan, 2009; Malzubris, 2008). The increase in demand for housing not only led to a boom in housing development, but also an increase in property prices. In fact between the years 1991 and 2007, house prices had grown from an average of 66,914 by 382% to an average of 322,634 (Kitchen et al, 2010) (See Appendix 3), and in some localities, for example Dublin, house prices had grown by 429% during this period. Waldron (n.d.) highlights further how Ireland experienced the highest level of residential investment and increase in prices than any other EU country beyond 1998 (See Appendix 6).

No. 7 identifies that by 2007, Ireland had reached a level of house production that surpassed the rest of Europe two-fold which was mirrored by the growth of the economy overall which D Agostino et al (2008) emphasise had more than doubled in size between 1997 and 2007. Overall the majority Of references to this period indicate positive growth has resulted in standards of living rising dramatically compared to the standards experienced only a few decades previously. With GDP increasing from around 15% below the EU average in the mid-1990s to 48% above by 2006 and unemployment falling dramatically over the same period (Norris and Coates, 2009), it would seem that Ireland by this stage was in a stable and progressive position.

2.4 The Irish Property Collapse After the sustainable aspirations were implemented by shifts in policies in the late 1980s leading to a response of rapid economic and growth, Irelands property market devastatingly Housing Sector 21

collapsed in line with the global economic downturn that had also impacted many other worldwide economies. Kirby (2010) highlights how Irelands downturn was among the most severe of any developed economy, and this has been reflected through numerous indicators, such as growth in unemployment, increasing migration levels, a drop in credit availability, failure of the construction industry and mass reduction in property values. Due to the extraordinary mortgages which were being taken out during the boom years, large Levels of insolvency have been experienced. This has had a direct impact on the value of property in particular which has been reduced to levels which are now less than the mortgages that were

originally taken out on them (Kelly, 2011) (See Appendix 7). House prices fell by a huge 31.2% from 2006 through the bulk of the recessionary years until 2009, and was followed by housing completion/output falling by 65% (Permanent TSB/ ESRI, various years; Department of the Environment, Heritage & Local Government, various years). More recently, Smyth (2012) highlighted that Irelands house prices fell by 18% in 2011 alone. The result of this has left some 130,000 mortgage holders in arrears on mortgage repayments, but also a more of repossessions (Smyth, 2012), further decreasing the likelihood of available credit. These factors have interacted with a wider downturn in economic activity to produce a very serious situation regarding unsustainable mortgage debt.(Waldron, n.d: 1) This in has added to the mass of vacancy rates across Ireland whereby entire estates have been left unoccupied by defaulting developers, due to the sheer lack of demand and people to be housed in them, or those that can afford them. University College Dublin research carried out by Williams et al. (2010) has estimated that the levels of housing vacancy reached

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345,000 units in 2010 (See Appendix 8) with Norris and Winston for the DEHLG (2002) identifying that during the same year, a total of 2,846 new estates were incomplete; with 777 of these being categorised as Ghost Estates (See Appendix 9). This was a term coined to describe developments of ten or more houses (estates) which had a vacancy rate of 50% or more houses within the development under construction (Kitchen et al. 2010 and O Callaghan, n.d.). 2.4. 1 Causes of the Property Collapse It would seem that Irelands economy and property market had collapsed even more rapidly than that of its incredible drive towards rapid growth through the nineties and into the 2000s. However, despite Irelands success over the two decades preceding the collapse being fairly

Unforeseen and unexpected, there are mixed arguments and evidence to the foresight of the impending collapse circa 2007. Whelan (2011) indicates how Ireland may have appeared strong in the eyes of outsiders, going on the basis of the high levels of labour and business, however, dangerous imbalances were underlying with the housing boom being the central influence that was pushing Ireland over the edge. In fact, some had already started to predict the impact that the property/housing and construction market was having on the wider economy, even prior to the onset of the worldwide economic downturn in 2007.

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Ahearne (2005) for example highlighted that there was a greater risk of house prices collapsing than people thought in 2005. Even prior to this, Honohan and Walsh in (2002) (p.23) highlighted more broadly how the Irish economy was displaying unmistakeable signs of overheating, referring to property prices in the period 1996 to 2000. Norris and Coates (2009) also highlight how the housing boom was a key driver of Irelands macro-economy and the banking system, but also deceptively masked the significant risks which came along with it. Beblavy et al. (2011) go further to point out that there was a significant difference between the boom years of the 90s and those beyond 2003, stating:The flavour of this boom was very different to Celtic Tiger Years (Beblav et al. 2011: 61) Overall it is fairly clear that a problem of overconfidence, ignorance and the presence of an unstable bubble were accountable for such a major collapse in a broadened sense. However, it could be considered that there were many components that tipped Ireland and the property market too far. When analysing the causes of the Irish property collapse it is evident that numerous channels of argument are exhibited. When taking these into account, it would seem that there is an interlinking nature between the causes and that each had been reliant on the other in the wider economic stability of Ireland.The most direct cause of the property collapse, was the massive increased in availability to mortgages at often ridiculous levels. The reliance of banks upon each other through interbank lending to continue funding at these levels also compounded and increased the problem when the bubble was close to bursting )Norris and Coates, 2009; Kitchen et al.. 2010). However, it be said that this was linked to the growth in the market; something which had begun in the late 1980s as mentioned.The over-reliance on the property market or as Whelan (2011 : 6) puts is having placed so many of its eggs in the construction basket could also indicate the lack of focus in Government policy. Housing Sectors 24

This therefore leads to the argument of whether a lack of Government regulation and essentially control over Irelands markets was to blame indirectly for the wide spectrum of causal factors. The regling and Watson reports (s.3.2) along with Kitchen et al. (2010) refer to breaches of corporate governance in the form of clientelism and cronyism, which would indicate that there was a notion of practice within Government policy. The Wright Report (2010) goes further to criticise the significant lack of expertise present within the Department of Finance when dealing with banking and lending regulation. This suggests that there is significant uncertainty that the Irish system was adequately supported to effectively and appropriately deal with the impending worldwide recession (IPC, 2010). Whelan (2011) points out how the Irish Government had been quick to place much of the blame for the collapse upon the international financial crisis, however as we have already explored, there is evidence of the growing dangers of Irish practices in the property market in particular, long before the recession came along. Although, these external shocks were catastrophic across many economies worldwide, particularly within the EU (Norris and Caotes, 2010), is there a case that the lack of regulation or as Wright coins the term in the Wright Report (2010), a laissez-faire approach to planning, aggravated the Irish collapse to a point which had been among the worst in all of Europe. These issues are strongly identified by the likes of Kitchen et al (2010) and Rudden (2011) in particular who claim that the developer-led system had been the core of the Irish property collapse. The issues surrounding influence state regulation on the property market collapse and resulting present day values will form the basis of the research undertaken in the following sections of this dissertation.

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2.5 State Regulation and the Property Market State regulation in Ireland has taken a front seat over the past few decades to the extent that it has had a profound role in the way that the property market has functioned, grown and progressed through the boom years. However there are numerous arguments which suggest that the light-touch nature of state regulation as a whole, has had a long term negative impact on the core value of property in Ireland, which to some degree has left the Irish property market in a state of despair particularly in the wake of the worldwide economic recession. This chapter aims to determine the role that state regulation has played in terms of Irish property market and indeed the impact that light-touch regulation has had on property values. Some of the earlier research into Irelands economic growth and prosperity tends to suggest that the level and nature of state regulation and implementation of policies had been overly positive and progressive. Fitz Gerald for example writes that

The pro-active industrial strategy pursued by Irish policy makers was central to the longterm development of a strong industrial base. (Fitz Gerald, 2000: 18). Kirby (2004) also emphasises how the incoming Fianna Fail government of 1987 had targeted initial stabilisation through expansionary fiscal contraction. This highlighted how there had been a perception of success and optimism over how the country was being controlled, and why forward thinking development policies such as mentioned Urban Renewal Scheme of the late 1980s was instigating significant confidence for growth in the property sector. Housing Sector 26

However, these early perceptions have been substantially overridden by post-Celtic Tiger and post-recession literature which reflects a far more negative interpretation of the role that state regulation has had, with regards to the collapse of the Irish property market in particular. Much of the criticism comes by way of the generous state-to-bank relationships and lack of strict controls which have been considered pivotal to the collapse of the property markets (Connor et al. 2010; Seyfried and College, 2009). Kitchen et al. (2010) refer to the failure of successive governments to live up to the recommendations of the Kenny Report (McCabe, 1974) which had suggested that there should be a movement away from poor housing policy and avoidance of major profits for landowners after the boom in the 1960s. Consequently, state regulation has been overly lacking in influence and heavily reliant on the property sector; giving a somewhat free reign to developers to drive the property market. Property Industry Ireland goes further to suggest that there is currently no organisation that represents the property industry as a whole, further indicating towards this lack of central control. This evidence is consolidated by the primary research part of this study whereby all interviewees suggest in some capacity that states regulation in Ireland during the boom years was inadequate attributing to negative effects upon Irelands property market. Interviewee 1, a Mortgage Broker from Rathcoole, Dublin referred to state regulation in terms of the following: It was poorly regulated, corruption of the state was present to a degree, planning had a lot of short comings because power was given to people that were not supposed to have it. I think that state regulation is the key to Irish property market over-reliance on the construction sector to provide growth, fuelled by state tax breaks, created a bubble and failure of governance to control lending practise that helped the housing bubble through loose lending, Housing Sector 27

helping building developers and giving tax breaks for housing development is a contributor factors. This suggests that although state regulation may have been present, the way the state was run and by whom was the fundamental to the fate of the property market, similar to the state-tobank

relationships emphasised by Seyfried and College (2009). This stance was further supported by Interviewee 2 and 3 in particular; Interviewee 2, a financial advisor from Wexford Town stating that state regulation had been non-existent, and suggested that market influence from the state is a hamper to long term stability (See Appendix 11 onwards). This non-existence of state-regulation is emphasised further by Interviewee 3, referring to a more self-regulated construction and property sector which was influenced by the Auctioneers and House Agents Act, and the codes of practice laid down by the likes of the Chartered Surveyors Ireland and Royal Institute Chartered Surveyors. These findings would suggest therefore that there is an idea of an overflow of unjust state involvement and a lack of state involvement and control through the boom years which point to a similar outcome of negative impacts on the property market in Ireland through its subsequent collapse. Although state regulation may have existed in some capacity, it was as good as non-existent in producing desirable impacts.

2.6 Light-touch Regulation It is strongly felt by many authors, researchers, officials and the public, that the recent collapse of the Irish property market and property values, were both directly and indirectly a result of the lack of state regulation and control through various elements of economic policy, Housing Sector 28

the general nature of governance, adequate monitoring of activities and attentive response mechanisms. There have been numerous descriptions and interpretations of these actions whereby the most notable reference to this being that of Light-touch regulation (Regling and Watson, 2010; Norris and Coates, 2010; OSullivan and Kennedy, n.d.). The former Minister for Housing and Planning, Willie Penrose responds to the failures of the Irish property market by stating: I am determined to move away from the inherent failings and problems arising from Irelands previous developer-led planning system, where development happened in a haphazard and opaque manner. (Society of Chartered Surveyors Ireland, 2011: 23) This statement provides a clear insight into the way in which the Irish planning system was working from the inside, and also insinuates that rather than pursuing a plan-led system with careful government control, the system was working to the direction and freedom of developers. Kitchen et al. (2012) highlights how there had been significant responsibility handed to developers and too few barriers to development. This in turn led to the failure of policy makers to dampen the property boom whereby regulation of banks and the level of mortgages were out of control, leading to a cycle of lending and development (Norris and Coates, 2010). Regling and Watson (2010) analyse light-touch regulation more from a perspective of a poor supervisory approach which had become very accommodating and overly market driven supported by the suggestion of both Kitchen et al. (2012) and Norris and Coates (2010) that this was a laissez-faire approach, signifying minimal intervention from the state. However, there are further arguments that would indicate that the state was well involved and informed through such processes where suggestions of corruption were not uncommon (Kitchen et al. 2012). Housing Sector 29

When confronting primary research, the view that regulation in Ireland was light-touch in nature, was overly supported by the interviewees. Interviewee 4 for example stated that: They (The Government) seemed to be reluctant to move in and regulate the market on time, especially the residential market. Light-touch regulation is reflected by the amount of people getting loans and the lack of strict and tight controls.

Interviewee 1 goes further to suggest that this light-touch regulation was related to the drive for power and money whereby the government was permitting lots of plans and developments to anyone regardless of the potential future impacts. This is well in similar fashion by Interviewee 3: they encouraged the markets but never said stop, even though warnings and criticisms of a potential bursting of the bubble were given. Interviewee 1 also referred to the involvement of corruption in the Fianna Fail Government which aligns with the suggestions of Kitchen et al. (2012). On the other hand, Interviewee 2 stated that: I dont believe it was totally the fault of the regulation at the time, they had rules to follow based on international standards, rules that seemingly were put in place to prevent another 1930 style crash ever happening again. The best way to create growth is to create a bubble. Governments who need a bubble for political gain will again loosen the grip on regulation to achieve bubbles in the future. Until government involvement in regulation is totally separate this will happen over and over again. Ireland has often referred to as a low-tax economy (Kirby, 2010; Regling and Watson, 2010), with limited and broadly applied tax policies that had little focus and without sustainability in mind. It seems that the over-reliance on property taxes in particular to uphold the Housing Sector 30

entire economy was prevalent, as the Governor of the Central Bank (2010:29) explains; Revenue became increasingly dependent on corporation tax, stamp duties and capital gains tax (in that order). According to Malzubris (2008) and Kitchen et al. (2010), the reliance on the property market for tax recoupment was significant whereby tax revenues from these had grown significantly during the boom years in line with huge expansions of the property market, to the extent that total tax revenue between 2002 and 2006 had tripled in contributing tax revenue by 15% (3.8% of GDP). Governor of the Central Bank (2010), Malzubis (2008) and Kirby (2010) claim that this growth was significantly intense with the property tax revenue contribution rising from 8% in 1988 to 30% in 2006. In 2008, this share fell to 20%, with more spectacular collapses in 2009 (Honohan, 2009; Kirby, 2010) a typical response from the collapse of property markets after the worldwide economic recession, leading to a 25 billion budget deficit in the national budget of 60bn in 2010 (Kirby, 2010) (See Appendix 11 onwards)

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We can safely assume that this tax policy was neither present nor dependable when the property market took a turn for the worse. A further policy issue surrounds the extent of tax incentives that had become common place and overzealous in application from the initial wave in the 1980s. These were introduced to stabilise the economy and property sector, and promote growth (Kitchen et al. 2010; Tenants First, 2009), however they had culminated in damaging the pocket of the government coffers along with encouraging large scale development which had spiralled out of control (See Section 4.3). An example of the stamp duty rate can be taken in this regard whereby throughout the years between 2001 and 2007, stamp duty had been lowered on several occasions much to the benefit of first time buyers and those (particularly developers) embarking on large investments into property (Governor of the Central Bank, 2010). Kitchen at al. (2010) also states how capital gains tax, VAT and development levies had also reduced significantly (See Appendix 10). Furthermore the significant failures in regulation is epitomised by the exploitation of a loophole regarding payment of stamp duty for land deals leading to further losses in revenue. Kerr (2008) and Tenants First (2009) claim that this would cost the state 251million in 2008 and 400million if not addressed.

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In addition to the regular tax policy instruments, the Irish government also implemented longterm and generous tax schemes/reliefs which particularly favoured developers who were able to take far more risks in the property market. An example of such schemes is that of the Pilot Renewal Scheme (1998) which was implemented into the Upper Shannon Region for the construction of dwellings (The Heritage Council, 2005). However, such schemes have led to a massive increase in housing stock, especially within the counties of Longford, Leitrim, Cavan, Sligo and Roscommon as highlighted by Kitchen et al. (2010) and OCallaghan (n.d.) (See Appendix 10) adding to the significant oversupply of property and impacting on its values. This demonstrates how careless regulation had allowed developers to take advantage and is further explored in section 4.3. Honohan (2009), ODonoghue (n.d.) and Kitchen et al. (2010) refer to Irelands tax structure as cyclical in nature which is expressed as being the key problem in combination with the overreliance on property market sales. It suggests that because the government had not instigated a formal and structured approach, these policies were and lacked careful planning, becoming an attributable factor to the property collapse, and indirectly, to the decline of property values. Regling and Watson through their 2010 report highlighted how government tax incentives were a contributor to the sustenance of available credit from Irish banks. This one done seemingly without the detailed checks on receivers credit ratings, increasing the risk levels in the property market with investors and developers continuing their building schemes at over inflated levels (Adair et al. 2009; ODonoghue, n.d

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Primary research supports these findings whereby, Interviewee 1 for example directly mentioned the role which tax incentives had to play in the property market collapse, referring to the overly generous holiday home, stamp duty and transaction taxes in particular (See Appendix 10). In support of this, Interviewee 2 stated that: The tax take was hugely reliant on stamp duties and the construction industry. Charlie McGreevys SSIA scheme had the opposite effect on the economy than it had initially been intended and this seemed to unnaturally delay recession and further feed the greed lead economy, suddenly everyone had large lump sums and most blew these on one off purchases leading to more inflation as demand was high. These opinions are in line with those of the likes of Regling and Watson whereby a relaxed tax system had added to the available credit which was floating around in Ireland, pushing up property values and creating a more vulnerable situation if the bubble was to burst.

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Another area which displays the light-touch approach to regulation is the control over Irish monetary policy which forms a significant area of property crisis. FitzGerald (2011) points out that major mistakes had been made through banking regulation and without the necessary governmentmeasures to sufficiently control this. The growing level of residential development along with favourable government tax incentives, falling interest rates and increased loan availability meant that there was far more confidence and opportunity for people to enter the market, whether as first-time buyers or investors (Honohan, 2009; IPC, 2011; OCallaghan, n.d.). Irelands entry into the Eurozone in 2002 can take significant responsibility for the increased favourability and mobility of capital (Harvey, 2010; Kirby, 2010; No.2), however, these were taken advantage of significantly by Irish lenders (OCallaghan, n.d.). This in turn added to confidence in the markets as part of the economic boom, further fuelling the contentment of banks and the government to continue shipping out large levels of credit. Malzubris (2008) identifies how residential mortgage lending had grown by an average of 25% between 2000 and 2006. Honohan (2009) highlights how lenders were happy to continue the easing of loan conditions beyond 2003, seemingly without any response of concern from regulators, despite there already being a speculative bubble which was being perceived as increasingly vulnerable (Kitchen et al. 2010). What seems more alarming is that on the back of this knowledge, lenders had been allowed to offer mortgages at loan-to-value ratios of 100% and beyond, a clearly unsustainable and high risk practice (OCallaghan, n.d., Honohan, 2009a.). Honohan (2009a.) refers to the fact that some tightening of capital requirements for 100% loan-to-value ratio loans did take place in 2006, however to meaningless levels

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The regulation of 31st March 2006 increased total capital required to back a 100% loan-tovalue ratio mortgage from 4 per cent of the loan to just 4.8 per cent a negligible increase of just 4,000 on a loan of 500,000. (Honohand, 2009a.: 7) A lack of regulation in the mortgage markets is further identified to by all of the interviewees in this research. Interviewee 4 in particular places much of the blame for the property collapse upon mortgage market regulation rather than state regulation in general: the reason for the boom is more to do with bank and financial institution regulation and lack of regulation in the mortgage market. This is supported by Interviewee 3 who stated the following in response to being asked if state regulation was to blame for the property collapse: Nothere are two phrases; new expectation and ease of cash availability of credit and insufficient regulation of the property market and banking system Interviewee 2 went further to refer to similar opinions of low interest rates which were not tightly controlled and easy access to money, as emphasised by Honahan in particular with reference toxic loans. They also referred to the significant confidence gained by lenders and the public stating that: people became greedy and even the middle classes were suddenly trying to be property tycoons, when civil servants were being approved for multiple investment mortgages on the back of benchmarked salaries we all should have seen the signs.

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These findings strongly point towards monetary policy and the significant involvement of banks being pivotal to the property bubble and indeed its swift and devastating collapse.

2.6.3 Planning Policies It has been widely expressed that the heart of the property crisis was a result of a poorly managed planning system, heavily dependent and influenced by the countrys many, and often large, property developers that had been dominating the markets during the boom. Kitchen et al (2010) refers to the Irish model as one that was based around a process of fasttrack modernisation led fore mostly by the developers, whereby a loose approach to planning policy matched the laissez-faire approaches to the countrys macro-economic and monetary policy. Local authorities therefore were open to outside manipulation of developers, which in turn supported their largely over-blown building programmed (Rudden, 2011). Connor et al. (2010) highlights a claim that most of the large developers had been closely linked to the ruling of the Fianna Fail political party. Interviewee 1 from the primary research strongly supported this viewpoint citing significant criticism for the Fianna Fail Government stating the following: I dont think the Government cared at the time as long as they remain in power and money was coming in, they granted permission to anyone regardless, for their own selfish reason. The lack of sufficient barriers to protect the fragile state of the planning system meant that it had effectively become a developer-led system run by developers, investors and banks and where local councillors took a back seat, rather than a more controlled plan-led system (Honohan, 2009; Kitchen et al. 2012). In fact, Irelands attempts to instigate some form of control through strategic planning, in the form of the National Spatial Strategy (NSS) (2002), were all but ignored by local authorities

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that favoured the unsustainable notion of progressive development and their growing relationships with money making developers (OToole, 2009). A 2010 article in the Irish Times referred to this as a complete disregard of the guidance laid out in the NSS. Key examples of this growing local authority-developer relationship lie in the growth of Public-Private Partnerships (PPPs) or Public-Private Initiatives. Hearne (2009) and Tenants First (2009) have described the PPP policy as a de-generation and dislocation, referring to the unsuccessful and damaging approaches to planning those PPPs can bring. This has been particularly clear in areas such as Dublin, where regeneration has been hit badly due to the recent downturn, leaving large projects being cancelled with uncertain futures. An example of this was the redevelopment plan for Croke Villas, just yards away from the National Sports Stadium Croke Park. The plan had originally been a full redevelopment of the housing estate through PPP between the council and Bennett Developments, however the developer pulled out of the project, leaving the future of the site uncertain and the community in limbo (RTE News, 2008; Irish Times, 2012).

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Source: RTE News, 2008

At present, the council is aiming to sell off the site with most of it currently deemed unfit for inhabitation. Croke Villas provides one example amongst many, particularly in Dublin, where the developer-led approach has been unsuccessful and of detriment to the state of development and local communities, much the result of poor state regulation in general, and light touch approaches. Hearne (2009) also identifies how the PPP setup has led to a reduction in the level of much needed social housing.

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2.6.4 Responses to the collapse Upon review of primary research responses, it is clear that the suggested opinions for how the Ireland should respond to the collapse is based around developing a regulatory authority and applying property re-valuation measures to kick start the property markets as suggested by interviewee 1. Interviewee 2 referred specifically to creating confidence in the Irish public once more through employment, but all interviewees agreed that the process would be a long-term one to recovery due to the damage caused, citing examples of recovery, such as Japanese and US economics of the past.

Housing Sector CHAPTER 03: RESEARCH METHODOLOGY 3.1 Introduction

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This chapter of the dissertation provides a presentation of the key methodological approaches and strategies which were adopted within this study. These were driven primarily by the research questions, aims and objectives, which were highlighted within the introduction section of this dissertation, along with the information gathered through the literature review section. The primary research question, as emphasised previously, is aimed at examining, whether state regulation was a key driving factor in the Irish property market collapse. Reviewing the existing literature and research related within this topic has been an important part of forming the progress of this research, providing the foundations and background of the topic in order to aid understanding of the issues, and therefore the areas which require further investigation, in order that the research question can be answered. When selecting an appropriate methodological approach to the research, clarity of the intended direction and outcomes is essential. Therefore we must significantly take into account the knowledge and information we are seeking, the key purpose of the research, the nature of the research, the resources which are available, the audience that the research will be aimed at and the overall intended outcomes (Naoum, 2007). 3.2 Data Collection Types Data is commonly categorised into two key forms; primary and secondary data. Primary research can be defined as the data gathered by interaction with other people and by collecting their opinions on an issue. This can be carried out via several key methods including one-on-one interview, focus groups, meetings and surveys. The data collected is therefore treated as unique data in that it is original and therefore exclusive to the

Housing Sector 41 researcher. This data can be utilised to draw comparisons with existing secondary data. Secondary data can therefore be taken as data which may have been collected by other researchers or drawn from various sources. Rowam (1997) refers to this form of data as second-hand analysis.

In the context of this dissertation, both primary and secondary data were considered for collection from the outset and indeed it was decided that both forms of data would be collected and utilised in conjunction with each other for this project. Several key reasons justify this decision, with the main one referring to the belief that reviewing a wide range of past publications, reports, studies and other literature on the Irish property collapse and state regulation would provide a broad level of meaningful information. However considering that this element of the research draws upon existing literature and the ideas and opinions of other authors, it was felt that a more in depth evaluation of the research questions was necessary, considering both the complexity of the Irish property collapse and also the wide varying which already exist. Therefore the route of gaining some primary sourced data would add value to the results of this research and also compliment and support the findings of secondary research. It is also felt that with the broad range of professional data analysis and expert opinion on the property collapse, a greater detailed and accurate indication to the past, present and future problems that Ireland has faced in regards to the collapse can be achieved from the combination of both primary and secondary research.

Finally, it was considered that due to the tricky situation of the economy, the potential opportunity to interview bankers, property developers, brokers would give the opportunity for first-hand accounts, which may give clearer insights or evidence that can support secondary investigation or information.

Key sources of secondary information that were therefore targeted as part of this research, included journals, professional reports and articles. This included European Union publications, Department of the Environment, Heritage and Local Government reports and professional real estate market reports from various bodies.

Housing Sector 42 3.3 Overview of the Research Approaches: Quantitative and Qualitative Naoum (2007) refers to quantitative research as objective in nature. It can be defined as an investigation into a social or human problem and is based upon the testing of a hypothesis theory consisting of variables. This approach involves data that can be measured and analysed utilising statistical procedures as a tool to determine whether a hypothesis or the theory hold any substance (Naoum, 2007). In order for this to be achieved, research requires a large number of participants in order to generate statistical data of the population under study (Robson, 2002). Qualitative research on the other hand is subjective in nature. This approach focuses upon opinions, meanings, experiences and descriptions (Naoum, 2007). The data gathered via qualitative research can be place into two categories; attitudinal and exploratory. Attitudinal data relates to the evaluation of an opinion or perspective whereas exploratory data is used when attempting to diagnose a situation, screen alternatives or derive new ideas (Naoum, 2007). For this study, the selected approach was qualitative research. This included a combination of attitudinal data and exploratory data. This approach was adopted primarily due to the absence of primary data and with it therefore, the need for statistical analysis.

Housing Sector 43 3.4 Research Method This research study has adopted a qualitative method of research. Interviews have been Conducted with the participants in order to obtain their responses regarding the role that lighttouch regulation of the mortgage lending system plays in the Irish property markets. The interviewees were property professionals , bankers, Head of Department of Real Estate and brokers 3.5 Justification of the Research Method This research has adopted a qualitative method of research because it was the most appropriate Method obtains information about the role that state regulation play in the Irish property markets. Survey questionnaire would not be able to provide in dept responses on this topic, it was necessary to adopt such a technique that could provide in dept and complete information on the role of state regulation play in the property market of Ireland. Qualitative method of research includes the interpretation of information in a qualitative context. In this research, interviews have been used for the purpose of investigating the content through analysis method. This method includes the analysis of how the individuals perceive and describe different scenarios. 3.6 Sample For the qualitative method of research, interviews were conducted with four people. Two of the interviews were conducted on telephone and the other two were conducted face to face with the participants.

Housing Sector 3.7 Ethical Considerations

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In conducting this research, the research is required to address a number of moral and ethical issues. Several ethical obligations are placed on the researcher, including their personal behaviour. In academic research, there are generally three concerned parties identify a series of questions that are ethical in nature. i) Informed Consent i.e. focus group participants had to sign a form stating that : a) b) Participation: This was voluntary. Respondent: He/She retained the right to withdraw even after agreeing in writing to participate. c) Grievances: If a respondent had a complaint against the researcher, he/she could make a complaint to the College. ii) The need for all voluntary participants to be fully informed on the purposes and all aspects of the intended research. The participants of the questionnaire survey and the focus group were provided with an Information Sheet, which: a) b) Outlined the research. Grievances, if a respondent had a complaint against the researcher, he/she could make a complaint to the College. C) Stated that privacy issues will be safeguarded and the information provided by the respondent would be kept confidential and would not be divulged to a third party other than the College. Furthermore, if a respondent wished to remain nameless, this would be respected and followed.

Housing Sector 45 3.8 Limitations The time that was provided for this research was limited; it is a major limitation for this study. The numbers of interviews that have been conducted for this research are only four, therefore, it would have been better to carry out more interview for the purpose of having more and complete information. Secondary research on this subject is limited; therefore, the literature review does not incorporate much of the empirical researches that had been conducted previously

3.9 Conclusion This chapter provides the research method that has been adopted for this research. Qualitative method of research has been adopted for this study and interviews have been conducted for answering the question of the research..

Housing Sector 4.1 Introduction This chapter of the dissertation incorporates the results of the qualitative research method that has been applied to it. This section is divided in to three parts. The first part of this chapter

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provides an overview of the property market in Ireland and the trends of House prices for the period from 1990 to 1995. The second part of this chapter incorporates the constraints of this report and its key criticisms. The third part of this chapter offers the analysis of the interviews that were conducted for meeting the qualitative part of this research.

4.2. Overview of the Property Market in Ireland In Ireland, traditionally housing plays a major role in the making of policy and politics. The conditions of housing that previously prevailed in the country were poor, until the recent times. Housing has always been given priority by the government in Ireland; the nineteenth century campaign played a major role in the housing related political movements (Fahey, 1999). This campaign started for the redistribution of the land from the landlords to the tenant farmers. Housing in Ireland has always received great priority from the government. Additionally, in the mid of 1990s, the issues of housing were kept at the top most layer of the political agendas due to the rise in the demand for housing, which was caused by growth in economy, population and the reduced size of the household. In spite of the changes that were made to housing market and the policy of housing in the Ireland, the system of housing was still not subjected to comprehensive review that was published by NECS (National Economic and Social Council) in the year 1988 (Fahey, 2011). Loans for home became easier to obtain due to the liberalisation of the mortgage market in the early 1980s and most of the rural Irish household reduced the costs of their ownership by

constructing dwellings on the land that was inherited from the relatives (Fahey Housing Sector 47

and Maitre, 2004, pp. 6). The disincentives to stay in the private rented accommodation that is social rented, and is allocated on the basis of needs, that encourage household to purchase dwellings . Additionally, the system of controlling rent was introduced for a part of the private rented sector by the increased by the Rent and Mortgage Interest Act of 1915 (Fahey, 1999). Furthermore, the rent control system was introduced for private rented sector due to the increase that took place in the year 1981, is credited with encouraging the landlords for leaving the business.

The above given table provides the changes that took place in the house price in Ireland, for the period of 1990 to 2002. It shows that after the year 1995, there was dramatic increase the prices of the houses in Ireland in comparison to the first half of the same decade. The trend of house prices also shows that the prices of the new house were greater during the first half of the decade that is from the year 1990 to 1996, but in the year 1998 to 2002 the prices of the second hand houses started in to increase significantly. Whereas, in the year 1997 the prices of both second hand houses and new houses were both equal.

Housing Sector 4.3 Limitations

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There are limitations to every research. For this research study, the analytical data collection was a major constraint as the interviewees have their own prior commitments and therefore, due to limited time duration they were unable to provide access information for this research study. Another major constraint was to find the professionals in the area of property market of Ireland, who were willing to provide information. With all these constraints, still all the information that has been provided in this research study is authentic and it is able to meet the aim and the objectives of this research.

4.4 Interview Analysis According to the interviewees, mortgage lending plays an important role in the property market of the country. They provide flexibility in the rates of interest. This shows that rates of interest on different products of mortgages, may fix the loan and they can be altered at a number of phases. Mortgage lending also provides a number of options for paying back a mortgage loan. Therefore, the repayments may also rely on the prevailing locality, culture and laws of tax. According to the interviewees, one of the most common methods for paying back the mortgage loan is to pay them in equal instalments. According to the interviewees, mortgage loans offer lower interest rates and therefore, the person does not have to pay any taxes.

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According to interviewee 1, the property market of Ireland was regulated poorly and it had a lot of short comings in planning because power was provided to people that were not supposed to have it. The regulations of the state are considered to be the ley of the property market in Ireland. According to him, the key to the collapse of the Irish property market was due to the lack of intervention by the government to the permission of planning, lack of adequate regulation in relation to the practices of lending. He also said that the key contributor to Irish property markets collapse was due to the over reliance on the sector of construction for the purpose of providing growth, fuelled by the breaks of tax, created a bubble and failure of governance to control the practice of lending that helped the bubble through loose lending to build developers and providing tax breaks to the house development as a contributing factor. According to him, the impact on the property market has been for present, medium and long term. He said that the impact was negative because it has wiped out wealth and the bankruptcy does not tighten the banks lending, which has an effect on the ability of the people to borrow and purchase property. For medium term, the impact is negative because the properties are under-valued. For long-term, a slow recovery is expected to occur, when the banks started to lend again, the people have secure jobs will be able to borrow and buy good property. The interviewee said that he did not believe that the market will recover anywhere near to the heights of the late nineties and the early 2000s. He said the government must possess all the commercial property re-valued, and reduced the rate to kick state the commercial property market and keep business going, also help in growth in construction industrial by finishing the houses on the ghost estate and sell them off.

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Interviewee 1 said that the future regulation must be formed by looking at how the regulation is going to impact the country in the next 5ys or 10yrs, and the new property service

regulatory authority is a good thing for checks and balancing of the players in the market, am not saying the estate agent are the course of the collapse but for public interest its a good thing to have everybody regulated to protect the layman. According to Interviewee 2, there was no role of state regulation in the Irish property market. He said that if the state has any control it should be allowed to determine the price, supply and demand where values fall and external market influence will only hamper long term stability not help the market find its natural place. The interviewee also said that the biggest cause of the Irish Property collapse was the loss of trust between banks internationally happening at a time where there were so many other problems at home. If one or more factors outlined above happened at different times the result would have been a lot less bad. But all occurring together as they did was catastrophic. The impact has been on the property market, medium people will start to be more comfortable parting with their savings and dip their toes back into the markets in search of bargains, long term you will see a return to more stable levels of investment back into property but hopefully not a return to a single asset approach to investing. The best way to create growth is to create a bubble; governments who need a bubble for political gain will again loosen the grip on regulation to achieve bubbles in the future. Until government involvement in regulation is totally separate this will happen over and over again. The government should allow foreclosures and stay away from any regulation and it must allow market forces to prevail.

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No effort made to damping the availability of credit, so if have property you need to pay tax. He said that the impact on the property market has led to stagnation in the market, no credit availability, people are nervous about their own income, if they will continue to earn what they earn now, property value will fall. He said that the state regulation must be formed by the people in the business should be honesty and accountable to somebody if theres complain run an honest business, property Services Regulatory Authority with sufficient time will tell, may develop and proposed a regulation in the future for agency setting up, it may become involved in producing things like conduct of Auction, transparency of disclose offer. The interviewee also said that the boom and bust has nothing to do with the property market, its more to do with the availability of credit in the market, must say that I am happy about the new regulation on the property industrial with regards to licensing all estate agent because its good to regulate the players in the market but they are not the cause of the crash, estate agent are there to solicit a willing seller and a willing buyer in an arms length transaction but there are few bad practise among them like gazumping in an auction gave bad reputation to the estate agent. According to interviewee 4, government has a duty to regulate the market; others will argue that the government should limit their involvement in the market. Government has to regulate the actors e.g. people who act as estate agents and the extent and manner they chose to do their business is relevant. The lack of state regulation of the agent has no affect in the boom; reason for the boom is more to do with bank and financial institution regulation and lack of regulation in the mortgage market. He said that the government should regulate residential market, private landlord with commercial property, revisit landlord and tenancy Acts should forms it regulation through the democratic way, and do more to regulate banks mortgage, and with the new PSR property service regulation services authority that is a good thing.

Housing Sector 52 CHAPTER 05: CONCLUSION AND RECOMMENDATIONS

State regulation has clearly had a significant impact upon Irelands property market, particularly over the last two decades, where Ireland has experienced its most potent economic boom and subsequent economic downturn. Ireland had been left in a state of relative despair since the turn of 2008, where the global economic recession compounded the already existing cracks in the Irish economy and its central powerhouse; the property market. All in all, the influence of the government through numerous mediums of regulation was a central component to the direction in which the country was taking from a very early period. After the recession of the 1980s, it seems that the Irish government, and progressively of which, the Fiana Fail Government, had pressed for less stringent taxation and interest measures that would allow the public and private sectors to invest and indulge, particularly in the Irish property market. The results of the interview showed that the government has a duty to regulate the market; others will argue that the government should limit their involvement in the market.

Housing Sector This is where the phrase light-touch regulation has been brought up time and time again

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since the economic downturn, whereby despite state regulation being influential in its nature, the lack of authoritative control mechanisms were absent, meaning that although the state was regulating, its control was unreasonably. After reviewing the nature and approach to Irelands development through this time, a familiar picture becomes clear that the country was now being held up and driven forward by a predominantly developer-led set of values with other scope for rational means of income being overlooked such as key property taxes and controls which should have been implemented at national, regional and local levels. The result was an amalgamation of ideas of money-hungry banks and developers to feed off each other in instigating a mass of development that could not be justified. Overall there is strong support both from numerous authors and indeed the primary research component of this study that suggests a lack of state regulation and indeed a central policy of light-touch regulation was key to the collapse of the property market in Ireland, along with a severe reduction in property values. Although, there are external factors which have influenced this result, such as the actions of the banks, particularly those of Irish origin, and indeed large developers and investors, it is difficult to suggest that the lack of state regulation was not fundamental to this process. In fact, the lack of adequate state controls enabled these external factors or players to gain a threshold in the control of the country, leading the property market to inevitable disaster.

Housing Sector 54 5.1 Recommendations It is recommended that the state regulation must be developed in an effective manner and it should be followed by the property market in Ireland. It is important that the government must try to get the market moving and ensure that the market moving, ensuring credit is available and try and great sanctity and people feel price will bottom out people will buy. If a person finds a right house to buy, the government must not involve a high jump in starting the market steady; as it tries to make sure that the banks provide credit that they deserve. It is also important that the people conducting businesses must be honest and accountable to somebody if theres complain run an honest business, property Services Regulatory Authority with sufficient time will tell. 5.2 Recommendations for Future Research This research study specifically focuses on the property market of Ireland. In future research can be conducted on the property market of a different country; also comparison of property markets of two or more countries can be conducted. Since, this research study specifically focuses on the role of light-touch regulation of the mortgage lending system on the Irish property markets, therefore, further research can also be conducted on the mortgage

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lending systems of other countries, or a comparison of the mortgage lending systems can also be carried out.

Housing Sector 56 REFERENCES

Adair, A. Berry, J. Haran, M. Lloyd, G. and McGreal, S. (2009) The Global Financial Crisis: Impact on Property Markets in the UK and Ireland, Report by the University of Ulster Real Estate Initiative Research Team , p. 45-52 Ahearne, A. (2005) We are on our own if the bubble bursts, The Sunday Business Post, 9 October 2005 Beblav, M. Cobham, D. and dor, L. (2011) The Euro Area and the Financial Crisis, Cambridge University Press, p. 12-13 Connor, G. Flavin, T. and OKelly, B. (2010) The U.S. and Irish Credit Crises: Their Distinctive Differences and Common Features DAgostino, A. McQuinn, K. and OReilly, G. (2008) Identifying and Forecasting House Price Dynamics in Ireland, Central Bank Technical Papers, 3/RT/08. Fahey, T. (1999) Introduction, in Fahey, T. (ed.), Social Housing in Ireland: A Study of Success, Failure and Lessons Learned Dublin: Oak Tree Press. Pp. 25-36 Fahey, T. (2001) Housing, Social Interaction and Participation among Older Irish People, in Towards a Society for all Ages: Conference Proceedings Dublin: National Council on Ageing and Older People. Pp. 9-5 Fahey, T. and Matre, B. (2004) Home Ownership and Social Inequality in Ireland, in Kurtz, K.and Blossfeld, H. (eds) Home Ownership and Social Inequality in Comparative Perspective Stanford: Stanford University Press. Pp. 6-9

Housign Sector 57 Fitz Gerald, J. (1999) The Irish Economic Boom , Les Estues de CERI, No..56 novembre 1999, The Economic and Social Institute, Dublin, p. 1-5 FitzGerald, J. (2011) Restoring credibility in policy-making in Ireland, Public Money & Management, 32:1, pp.27-34 Forrest, R. and Yip, N. (Eds.) (2011) Housing Markets and the Global Financial Crisis: The Uneven Impact on Households. Edward Elgar Publishing Ltd. P. 32-35 Gerlach, S. (2011) Irelands road out of the crisis, Address by Mr Stefan Gerlach, Deputy Governor of the Central Bank of Ireland, p. 15-19 Governor of the Central Bank (2010) The Irish Banking Crisis: Regulatory and Financial Stability Policy 2003-2008, A Report to the Minister for Finance by the Governor of the Central Bank, 31 May 2010 Hearne, R. (2009) Origins, Development and Outcomes of Public Private Partnerships in Ireland: The Case of PPPs in Social Housing Regeneration, Combat Poverty Agency, Working Paper Series 09/07, November 2009 Honohan, P. (2009) What went wrong in Ireland? Trinity College Dublin, May 2009 Honohan, P. (2009a.) Responding to the Crisis, Department of Economics and IIIS, Trinity College Dublin and CEPR Prepared for the UCD-Dublin Economic Workshop Conference: Dublin,p. 98-102 Honohan, P. and Walsh, B. (2002) Catching Up with the Leaders: The

Irish Hare, Source: Brookings Papers on Economic Activity, Vol. 2002, No. 1 (2002), pp. 1Irish Property Council (IPC) (2011) Time For Action-Wanted Plaintiff, Press Release, Dublin, Thursday 24th March 2011,

Housing Sector 58 [Online]:http://www.irishpropertycouncil.com/pdf/Press_ReleaseIPC_Plaintiff_Campaign_Mar2011.pdf, Accessed: 04.04.12 Irish Times (2010) Local Authorities told to adhere to spatial strategy, Monday October 2010,[Online]: http://www.irishtimes.com/newspaper/ireland/2010/1004/1224280311617.html, Accessed: 09.04.12 Irish Times (2012) Plan for major Croke Park entrance would see 1960s flats demolished, Monday February 6 2012, [Online]: http://www.irishtimes.com/newspaper/ireland/2012/0206/1224311332228.html, Accessed: 15.05.12 Kelly, M. (2011) A Note on the size distribution of Irish Mortgages, UCD Centre for economic research working paper series, WP11/17, University College Dublin, School of Economics, p. 14-15 Kerr, A. (2008) State loses 400m in stamp duty loophole, Independent.ie, [Online]: Retrieved From: http://www.independent.ie/national-news/state-loses-400m-in-stamp-dutyloophole-1340379.html, Accessed at: 08.04.12 Kirby, P. (2004) Globalization, the Celtic Tiger and Social Outcomes: Is Ireland a Model or a Mirage, Routledge, Globalization, Vol. 1, No.2, pp.205-222 Kirby, P. (2010) Celtic Tiger in Collapse: Explaining Weaknesses of the Irish Model, 2nd Edition, Basingstoke: Palgrave Macmillan, p. 45-54

Housing Sector 59 Kirby, P. (2010) The Irish Miracle and its collapse: learning the lessons, Institute for the Study of Knowledge in Society (ISKS), Professor of International Politics and Public Policy, Department of Politics and Public Administration, University of Limerick, Ireland, p. 102105 Kitchen, R. Gleeson, J. Keaveney, K. and OCallaghan, C. (2010) A Haunted Landscape: Housing and Ghost Estates in Post-Celtic Tiger Ireland, National Institute for Regional and Spatial Analysis, NUI Maynooth, NIRSA Working Paper Series No.59 July 2010 p. 5 Kitchen, R. OCallaghan, C. and Gleeson, J. (2012) Unfinished estates in Post-Celtic Tiger Ireland, NIRSA Working Paper Series, No. 67 Feb 2012, p. 14-18 Malzubris, J. (2008) Ireland's housing market: bubble trouble, Volume 5, Issue 9, p. 2-5 Naoum, S.G. (2007) Dissertation Research And Writing for Construction Students, Butterworth-Heinemann, p. 75-76 Norris, M. and Coates, D. (2010) How Housing Killed the Celtic Tiger: Anatomy, Consequences and Lessons of Irelands Housing Boom and Bust, 2000-2009, Paper presented to the Cambridge Centre for Housing and Planning Research Conference, p. 10-12 Norris, M. and Winston, N. (2002) Housing Policy Review 1990 2002, Department of the Environment, Heritage and Local Government (DEHLG), The Housing Unit, p. 78 OCallaghan, C. (n.d.) Ghost Estates: Urban Geography after NAMA. To be included in Crowley, C. and Linehan, D. (Eds.) (Forthcoming) Spacing Ireland, Manchester University Press, p. 42

Housing Sector 60 ODonoghue, C. Loughrey, J. and Morrissey, K. (n.d.) Modelling the Impact of the Economic Crisis on Inequality in Ireland. Teagasc Rural Economy and Development Programme School of Business and Economics. National University of Ireland, Galway. p 19. OSullivan, K.P.V. and Kennedy, T. (n.d.) What caused the Irish banking crisis?, [Online]: http://ssrn.com/abstract=1888342, Accessed: 10.04.12 Regling, K. and Watson, M. (2010) A Preliminary Report on The Sources of Irelands Banking Crisis, Government Publications, p.62 Robson, C. (2002) Real World Research: A Resource for Social Scientists and PractitionerResearchers, Blackwell Publishers, 59-86 RTE News (2008) Developer pulls out of regeneration project, Wednesday 10 December 2008, [Online]: http://www.rte.ie/news/2008/1210/dublin.html?view=print?view=print, Accesed: 10.05.12 Rudden, P.J. (2011) Building a Sustainable Recovery, Engineers Ireland Presidential Address Seyfried, W. and College, R. (2009) Monetary policy and housing bubbles: a multidirectional perspective, Research in Business Economics Journal, p. 12-19 Smyth, J. (2012) Irish house prices plunged 18% last year [Online]: http://www.ft.com/cms/s/cff68cf6-3601-11e1-9f9800144feabdc0,Authorised=false.html?_i_location=http%3A%2F%2Fwww.ft.com%2Fcms% 2Fs%2F0%2Fcff68cf6-3601-11e1-9f98-00144feabdc0.html&_i_referer=#axzz1iW4yOFIM, Accessed: 12.05.2012

Housing Sector Society of Chartered Surveyors Ireland (2011)Where now for planning and housing? Exclusive interview with Minister for Housing and Planning, Willie Penrose, Surveyors Journal, Volume 1, Number 3, p. 24-29 Tenants First, (2009) Housing for need not greed, [Online]: http://www.stmichaelsestate.ie/pdf/HousingforNeed.pdf, Accessed: 04.03.2012 The Guardian, (2010) Allied Irish Bank crisis blamed on 'special loans' to property developers, [Online]: http://www.guardian.co.uk/business/2010/mar/30/allied-irish-bankproperty-toxic-debt-ireland-banks, Accessed: 20.04.12 The Heritage Council (2005) Pilot Rural Renewal Scheme for the Upper Shannon Area, Submission to the Department of Finance Final Report, p. 75 Waldron, R. (n.d.) Home ownership in the Dublin City Region: The Bubble and Its Aftermath, University College Dublin, School of Geography, Planning and Environmental Policy Whelan, K. (2011) Irelands Sovereign Debt Crisis, UCD Centre for Research, Working Paper Series 2011, WP11/09 Williams, B. Hughes, B. and Redmond, D. (2010) Managing an Unstable Housing Market,

61

University College Dublin Urban Institute Ireland, Working Paper Series, UCD UII 10/02, p. 11 Wright, R. (2010) Strengthening the capacity of the department of finance: Report of the Independent Review Panel, The Wright Report, p. 2-6

APPENDICES

Appendix 1

Unemployment in Ireland

Source: Eurostat

Appendix 2

Property Market Interest Rates

Source: http://www.ronanlyons.com

Appendix 3

Housing Output

Source: Malzubris, 2005

Source: Kitchen et al. 2010

Appendix 4

Urban Renewal Scheme in Ireland

Source: Norris and Gkartzios, 2011: 7

Appendix 5

Mortgages Ireland

Source: http://www.finfacts.ie

Appendix 6

EU vs Ireland

Source: Norris and Winston, 2002

Appendix 7 House Prices Ireland

Source: Marksdttir, 2011

Appendix 8 Housing Vacancies

Source: http://www.thejournal.ie

Appendix 9 Ghost Estates

Source: Kitchen et al. 2010

Appendix 10 Planning Applications Case Study

Source: The Heritage Council:.9)

Appendix 11

Interview 1 Telephone Interview Date: 7th August 2012 Interviewee: Leo Healy Position: Principal (Mortgage Broker) Finance First, Main Street, Rathcoole

1. What do you believe the role of state regulation holds in the Irish property market? It was poorly regulated, corruption of the state, planning had a lot on short comings because power was given to people that were not supposed to have it. I think the state regulation is the key to Irish property market. 2. Would you say that is the key contributor to the Irish property market collapse Yes, because over-reliance on the construction sector to provide growth, fuelled by state tax breaks, created a bubble and failure of governance to control lending practise that helped the housing bubble through loose lending helping building developers and giving tax breaks for housing developent is a contributor factors

3. What do you think was the key contributor to the Irish property market collapse Yes, it was lack of government intervention to planning permission, lack of adequate regulation in relation to lending practises and the number of building that was allowed to be built. 4. What do you believe the impact has been on the property market for the present, medium term and long term? Present: bad because it has wiped out wealth and the impact has been bankruptcy due to tightening of bank lending, which has affected people ability to borrow and purchase property Medium: I think a lot of properties are under-valued; the impact has been the ghost estate Long term: thats a bubble in anyones understanding, so a correction will occur, we should see a slow recovery, when banks start lending again, people in secure job will be able to borrow and buy good property

5. Would you agree that the term light-touch regulation to describe the actions of the Irish government during this period, is an accurate and fair statement? Please explain

Yes, I would believe that again the FIANNA FAIL Government only cared at the time as long as they remain in power and money was coming in, they granted permission to anyone regardless, for their own selfish reason 6. Do you believe that the market will ever recover anywhere near to the heights of the late nineties and early 2000s? No 7. How should the government respond to the collapse? They should have all the commercial property re-valued, and reduced the rate to kick state the commercial property market and keep business going, also help in growth in construction industrial by finishing the houses on the ghost estate and sell them off or demolished 8. How should state regulation be formed in the future? Should be formed by looking at how the regulation is going to impact the country in the next 5ys or 10yrs, and the new property service regulatory authority is a good thing for checks and balancing of the players in the market, am not saying the estate agent are the course of the collapse but for public interest its a good thing to have everybody regulated to protect the layman 9. Do you feel there are any international examples of success that Ireland can learn from Japan, the way they dealt with their recovery

Interview 2 Telephone Interview Date: 8th August 2012 Interviewee: Kev Madden Position: Financial adviser with Culleton Insurance, Selskar Square,Wexford Town, 11yrs background in Banking

1. What do you believe the role of state regulation holds in the Irish property market? I wasnt aware there was any but if there were I would be opposed to the state having any control or say in how the market is regulated where price is concerned, supply and demand should be allowed determine where values fall and external market influence will only hamper long term stability not help the market find its natural place. 2. Would you say that the key contributor to the Irish property market collapse The fact that in early 2000s when EU wide there were low interest rates across the board in member states including Ireland when in fact at that time Ireland needed tighter control on inflation. Combine this time of inflation with easy access to cheap money and the problem just got out of control, add to this the general good feeling in the economy with huge exchequer tax collections year on year and a political establishment that irresponsibly ignored warning signs and staged giveaway budgets to win seats when what they should have been doing was preparing for the rainy future, people became greedy and even the middle classes were suddenly trying to be property tycoons, when civil servants were being approved for multiple investment mortgages on the back of benchmarked salaries we all should have seen the signs. The tax take was hugely reliant on stamp duties and the construction industry. Charlie McGreevys SSIA scheme had the opposite effect on the economy than it had initially been intended and this seemed to unnaturally delay recession and further feed the greed lead economy, suddenly everyone had large lump sums and most blew these on one off purchases leading to more inflation as demand was high. Banks were hugely profitable year on year and shareholders demanded more and more returns. When the mainstream banks like AIB and BOI were trailing in growth when compared to the property Banks like Anglo and Nationwide this make their shareholders demand that they too change their lending models to compete with the unstable irresponsible models in Anglo and Nationwide. The party could have continued however and at least there would have been a softer landing if all we had to worry about were the problems at home, however once banks realised that as simply selling one mortgage to one individual was in practice a profitable business, then surely buying 1000s of mortgages at a time from another international bank would be more profitable and less costly staff wise etc. and sure after all werent all banks responsibly graded by Moodys and Standard and Poors and these agencies surely had no other agenda!! And wasnt money so cheap and bank liquidity requirements quite loose Then it became

common practice to purchase 1000s of mortgages at a time in single transactions between banks all over the world, but what nobody thought to check was were these loans actually good responsible loans, the truth was that the people packaging them together for sale didnt care and the purchasing bank took out insurance in some cases so they never need to check at all, this inflated the bubble and when the American economy collapsed under the heavy weight of the sub-prime mortgage market (of which now thousands where actually owned by mainstream Irish Banks) the ripple effect was huge, Banks now stopped trusting each other and the cheap money stopped suddenly, Now such things that had been common practice i.e. where a bank would borrow money overnight on the interbank market to fill its liquidity requirements just werent possible, this caused panic and resulted in things like government guarantees and ECB overnight funding just to stave off runs on banks and chaos and pandemonium. Also at this time the worlds biggest insurance company that covered most of these loans Aon needed a U.S Government bail out, as they couldnt meet the demands of the claims it was now faced with. Because funding for banks worldwide dried up the customers suffered and they lost their jobs as a result of their employers not having access to funding, this in turn caused them to default on their mortgage repayments and in America especially resulted in swift foreclosures, which is why they will find the bottom of the market quicker and recover quicker, but this also triggered more and more claims that could not be met by AON and others. Lehman Brothers went to the wall and market sentiment was at an all time low. Essentially trust evaporated between banks and Goldman Sachs employees who was a big player in packaging these loans and selling them to their clients was even caught on tape calling their own clients stupid and admitting that the loans were Shite this didnt help confidence at all. So to answer the question the biggest cause of the Irish Property collapse was the loss of trust between banks internationally happening at a time where there were so many other problems at home. If one or more factors outlined above happened at different times the result would have been a lot less bad. But all occurring together as they did, was catastrophic. Its not all bad news though, Greed fuels recoveries and everyone loves a bargain. In the last 6 years Irish people too have hoarded away cash like its going out of fashion (which it may actually do with the possible Euro Collapse) but if you take these Alsopps and NAMA property auctions this is helping people see value in the market and those who have the means will still get lending as things get gradually better and trust comes back into the banking sector. The challenge this time is to make sure it doesnt happen all over again. 3. What do you think was the key contributor to the Irish property market collapse see above

4. What do you believe the impact has been on the property market for the present, medium term and long term?

Present we are in a chase to the bottom clear out stage, Medium people will start to be more comfortable parting with their savings and dip their toes back into the markets in search of bargains, long term you will see a return to more stable levels of investment back into property but hopefully not a return to a single asset approach to investing where all peoples eggs are in one basket. 5. Would you agree that the term light-touch regulation to describe the actions of the Irish government during this period, is an accurate and fair statement? Please explain I dont believe it was totally the fault of the regulation at the time, they had rules to follow based on international standards, rules that seemingly were put in place to prevent another 1930 style crash..all we have now is more rules tightened up whos aim is to prevent a 2000s style crash ever happening again. The best way to create growth is to create a bubble, governments who need a bubble for political gain will again loosen the grip on regulation to achieve bubbles in the future. Until government involvement in regulation is totally separate this will happen over and over again 6. Do you believe that the market will ever recover anywhere near to the heights of the late nineties and early 200s? Of course for exactly the reasons in 5 above, everything is cyclical. And people are always greedy, and arent interest rates even lower now than when this all began. History starting to repeat itself already. 7. How should the government respond to the collapse? They should allow foreclosures and stay away from any regulation otherwise we will have a stagnant market for a long time to come. Allow free market forces to prevail. (Harsh I know) 8. How should state regulation be formed in the future? See 7 above 9. Do you feel there are any international examples of success that Ireland can learn from The US where they boom and bust constantly and it doesnt phase them, they have proper bankruptcy procedures that doesnt keep the key economy driving individuals out of the market place long if they fail first or even second time round. In Ireland we banish them for 12 years. This is hardly good for job creation. Some people need to take risks to create jobs and if they fail should be allowed try again and learn from their failure. Granted America allowing mass foreclosures and repossessions creates its own social problems but they do have one thing right, the government doesnt get involved to the extent they do here.

Interview 3 Face-to-face Interview Date: 25th July 2012 Interviewee: Martin Hanratty Position: Head of Department of Real Estate Dublin Institute of Technology 1. What do you believe the role of state regulation holds in the Irish property market? Little regulation in the past order then auctioneer act were the agent need to register themselves, the market regulated itself, the Chartered Surveyors Ireland, Royal Institute Chartered Surveyors regulated themselves and has code of practise

2. Would you say that a lack of state regulation was a cause of the property market collapse? No, two words, new expectation, easy of cash availability of credit and insufficient regulation of the property market and banking system

3. What do you think was the key contributor to the Irish property market collapse? Government policy encourages investment in property market in the height of the boom e.g. tax incentives e.g. holiday homes, major fact: encourage transactions taxes and stamp duty, no effort made to damping the availability of credit, so if have property you need to pay tax

4. What do you believe the impact has been on the property market for the present, medium term and long term? Present; stagnation in the market, no credit availability, people are nervous about their own income, if they will continue to earn what they earn now, property value will fall Medium: there will be shortage of first generation office in the Dublin city down town, will see some of the uncompleted office been taken on by Banks and completed Residential: there will be shortage of property in greater Dublin area close to the city and the classical typical 3 bedroom family home other market will be far to recover Outside: it will varied depending, location and accessibility been near motor ways trains links and some will never recover and has to be demolish 5. Would you agree that the term light-touch regulation to describe the actions of the Irish government during this period, is an accurate and fair statement? Please explain.

Yes, they encourage the market and they never said stop even people that warn the government over the heat were criticise, I dont think auctioneer were the course of the boom and subsequent of collapse

6. Do you believe that the market will ever recover anywhere near to the heights of the late nineties and early 2000s? Probably not and hopefully not prices will recover but it may been 50yrs, it will be along time, there will be defaulters depending on how the banks will deal with it

7. How should the government respond to the collapse? They need to try getting the market moving, ensuring credit is available and try and great sanctity and people feel price will bottom out people will buy, I will advice, if you find the right house buy, I dont think the government should get involve too much to jump start the market steady as its goes, try to make sure the banks give credit to those that deserve it.

8. How should state regulation be formed in the future? People in the business should be honesty and accountable to somebody if theres complain run an honest business, property Services Regulatory Authority with sufficient time will tell, may develop and proposed a regulation in the future for agency setting up, it may become involve in producing things like conduct of Auction, transparency of disclose offer

9. Do you feel there are any international examples of success that Ireland can learn from No comment maybe Australia Finally: Boom and bust has nothing to do with the property market, its more to do with the availability of credit in the market, must say that I am happy about the new regulation on the property industrial with regards to licensing all estate agent because its good to regulate the players in the market but they are not the cause of the crash, estate agent are there to solicit a willing seller and a willing buyer in an arms length transaction but there are few bad practise among them like gamping in an auction gave bad reputation to the estate agent.

Interview 4 Face-to-face Interview Date: 25th of June 2012 Names: Mr. Tom Dunne Job title: head of School of Real Estate and Construction Economics Dublin Institute of Technology, Bolton Street, Dublin 1

1. what do you believe the role of state regulation holds in the Irish property market? It is highly political government has a duty to regulate the market, others will argue that the government should limit their involvement in the market Government has to regulate the actors e.g. people who act as estate agents and the extentand manner they chose to do their business is relevant The likes of estate agens appraisal industrial, financial intermediary, state regulation is a must 2. would you say that the key contributor to the Irish property market collapse The lack of state regulation of the agent has no affect in the boom, reason for the boom is more to do with bank and financial institution regulation and lack of regulation in the mortgage market 3. what do you think was the key contributor to the Irish property market collapse It was a boom and over heated boom and is going to collapse and the further it goes on and the availability of credit, financial sector were the course 4. what do you believe the impact has been on the property market for the present, medium term and long term? It was shocking impact of the crash and is likely to endure Medium: the effect will be trouble, activities in the market is going to be limited Long term: will correct it self

5. would you agree that the term light-touch regulation to describe the actions of the Irish government during this period, is an accurate and fair statement? Please explain Yes, they seems reluctant to move in and regulate the market on time, specially residential market light-touch regulation on amount of people getting loans and lack of strict and tight control

On commercial market upward only rent review should have been restricted earlier

6. Do you believe that the market will ever recover anywhere near to the heights of the late nineties and early 200s? No, not until long term, that would take decade, will never return, boom flawed will need a sustainable market 7. How should the government respond to the collapse? They have done a lot, stamp duty need to be regulated, the banks mortgages, loan to value ratio, and what type of money should be given to people 8. How should state regulation be formed in the future? Government should regulate residential market, private landlord with commercial property, revisit landlord and tenancy act should forms it regulation through the democratic way, and do more to regulate banks mortgage, and with the new psr property service regulation services authority thats a good thing.

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