In 2007 Shrewsbury Road in Dublin was the sixth most expensive street in the world. Now, post-crash, homes have been abandoned and the tycoon residents have run for the hills
- The Observer,
- Article history
There is a padlock on the gate of Walford, the most expensive house in the priciest street in Ireland. Graffiti adorn the conservatory windows, the lawn is overgrown and old mattresses are piled up in the front room.
In a well-publicised deal at the height of Ireland's economic boom, this red-brick mansion, which sits on a one-and-a-half-acre plot, was sold for an eye-watering €56m (£48m) to a mysterious trust called Matsack Nominees, widely reported in the Irish media to be controlled by the wife of a millionaire property developer, Sean Dunne. The neighbours include telecoms tycoon Denis O'Brien, the biggest shareholder in Independent News & Media, who bought Belmont, a house a few doors down, for €35m.
Walford, which sits abandoned after a failed redevelopment application, is on Shrewsbury Road – a pleasant, tree-lined avenue in the Dublin inner suburb of Ballsbridge which, in the extraordinary gold rush that gripped Ireland, ranked as the sixth most expensive street in the world, ahead of Beverly Hills's Carolwood Drive and St Moritz's ritzy Via Suvretta.
Few landmarks sum up Ireland's boom and bust, culminating in last week's €85bn international bailout, more succinctly than this street, where prices have crashed by at least two-thirds. "It's right in the centre of things; it's a street that's always achieved top prices," says Peter Kenny, associate director at estate agency Colliers International. "But from the height of the market, it's fallen a very great deal. The sharpest drop has been at the top of the market."
To the uninitiated, Shrewsbury Road looks little different from the upper-middle-class Dublin thoroughfares surrounding it. On a wintry day last week, snow-covered Mercedes cars and BMWs sat in the drives of many of the timber-gabled homes, shielded by neatly trimmed hedges. But a roll-call of Ireland's most prominent business people live cheek by jowl here.
The former Allied Irish Banks chairman, Dermot Gleeson, who was obliged to bob and weave at the troubled institution's annual meeting last year to avoid eggs hurled by angry shareholders, is one resident. Gleeson headed AIB throughout the Irish financial industry's ill-fated lending binge – the bank is now trying to raise €5bn to avoid being nationalised by the Irish government alongside Bank of Ireland and the doomed Anglo Irish Bank, which is shortly to disappear from high streets.
Another resident is Niall O'Farrell, the founder of a chain of formalwear shops, Black Tie, who stars on the Irish version of the television show Dragons' Den. O'Farrell is trying to sell his house – initially for €14m, although the price has been drastically cut in recent weeks to €8m.
Derek Quinlan, the property magnate who part-owns Claridges hotel, is also looking for a buyer for his Shrewsbury Road residence, priced at €7.5m, after quitting Ireland in favour of Switzerland a year ago. Nobody is biting. A house hasn't changed hands on Shrewsbury Road for two years.
"During the boom times, these houses appreciated disproportionately to the rest of the market; the growth at the upper end was just phenomenal," says Simon Ensor, director of estate agents Sherry FitzGerald, who says Dublin got rich so suddenly that there was a dearth of luxury property for the city's booming class of spectacularly wealthy entrepreneurs, many of whom are now executing hasty exits.
"It has to do with our history. The fine houses built in Ireland were built more by the English than the Irish, for top civil servants and top judiciary," says Ensor. "There weren't a huge amount of good houses built when the country got its independence, people didn't have the wherewithal to build like this."
These days, he says, to calculate the price of a property on Shrewsbury Road you have to "start by cutting 50% off the peak price and then calculate how much more that particular property has depreciated".
There were few voices urging caution during Ireland's decade-long "Celtic tiger" roar of prosperity. The country's growth was visible in inward investment by the likes of Pfizer, Google, Intel and Microsoft, which took advantage of Ireland's ultra-low 12.5% rate of corporation tax to establish major European hubs.
It ran out of control as land prices rocketed into the stratosphere and banks made reckless loans on a staggering whirl of construction. At the boom's zenith in 2007, 93,000 new homes were thrown up in a single year in a country of 4.5 million people. In per capita terms, that would be equivalent to 1.25 million properties being built in Britain in 12 months.
Constantin Gurdgiev, an economist at Trinity College Dublin says the Celtic tiger became a "Celtic Garfield", referring to the plump orange cartoon character: "Uninterested, fat and unwilling to change."
He says banks were distracted from productive investment by the property binge. "The attitude was, 'we can make a 10% return by building semi-detached bungalows in the middle of nowhere, so why should we invest in your company'," he says.
The property bubble burst two years ago and the Irish government has so far absorbed €45bn in bank losses, with a further provision of €10bn under last week's bailout deal with the IMF and the European Union. But nagging doubts about whether this will be enough have undermined Ireland's sovereign credit rating.
On the streets of Dublin last week, there was anger and disillusionment, largely directed at bankers, with government ministers as secondary targets. In a budget on Tuesday, finance minister Brian Lenihan will outline a €15bn austerity package sufficient to satisfy Ajai "The Chopper" Chopra, leader of the IMF delegation camped out at Dublin's Merrion hotel.
"What's the point of having a constitution if we're not economically sovereign?" asked Paul O'Sullivan, an urban planner from Cork, who was protesting outside the capital's parliament building with a sign declaring: "Bailed out, slopping out, the jury's out."
Another demonstrator, maintenance worker Paul Shields, said: "The IMF are here for one thing: to take care of the German banks, the Swiss banks, the British banks who are owed money by our banks. This will cost our country billions over the years."
Many of the Irish millionaires on Shrewsbury Road have seen their wealth decimated. But they aren't the real victims of Ireland's crisis. The country's unemployment rate is 13.5%. It fell by a tenth of a percentage point last month, but only because people are leaving the country to find work. Britain's rate, in contrast, is 7.7% and Europe's average rate is 9.6%.
David Begg, general secretary of the Irish Congress of Trade Unions, told the Observer that he feared the impending programme of austerity will push Ireland into a "lost decade" akin to Japan's stagnation in the 1990s. " I think we'll go into a very big slump; probably like the Japanese experienced in the 1990s, maybe worse. I don't have any hopes at all that this will solve the problem," he said.
Unions oppose a €1 cut in the minimum wage to €7.65 (£6.42), although this will still be well above Britain's £5.93. And Begg argued for a slower, longer-term period of budget deficit reduction: "There's a better, fairer way of doing this."
Back on Shrewsbury Road, several homes are being rented by diplomatic missions. The Finnish and South African ambassadors to Ireland live on the street, and the Belgian embassy is on the corner.
Just like everybody in Ireland, estate agents here hope that the bailout will be a turning point for the country. David Bewley, residential director at property firm Lisney, says: "Do people here have the confidence to spend €5m on a house? All the evidence suggests the answer is no."
Cautiously, though, he adds: "The fact that our finances are being organised from a little farther afield may help."
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