Mixed blessings as property recovery gathers pace

The property recovery continued apace in August, particularly in Dublin, according to figures just released. And while it still seems to be a two-speed resurgence, there are now tentative signs that things are picking up beyond the Pale. Great news. Or is it?

It remains to be seen if we have learned anything from the spectacular property crash of recent years, which plunged hundreds of thousands of householders into negative equity territory. While we have become somewhat inured to the term, it's quite terrifying when you think for a moment about what negative equity actually means: that we owe more to the lending institution than our property is worth.

•Our home is supposed to be our greatest asset. FILE PHOTO

There was a time when you could pop the keys through the letterbox of your bank with a note attached telling the branch manager that they could keep the house while you did the decent thing and emigrated. But unless you are one of the lucky ones to secure a debt write-down, you can now find yourself in the unenviable position of losing your home while still being in hock to your lender.

The property crash was anything but the soft landing predicted by the last Fianna Fail-led Government. The late Brian Lenihan tried to instill a sense of collective responsibility in us, stating during a television interview that, "to be fair, we all partied". There may have been a degree of truth in what he said but it hardly takes from the fact that the property bubble happened on his Government's watch and was fuelled by Fianna Fail's - and the economy's - reliance on stamp duty.

We may well have partied but it suited the Government for us to do so. In fact, we were encouraged to spend like there was no tomorrow. Remember when Charlie McCreevy gave us money for nothing through the SSIA savings scheme? Or what about all the tax breaks afforded to property developers? We were even given an extra grand a year for every baby we produced - and that was on top of generous, universal Child Benefit payments.

After the crash, it was no longer a case of trying to get a foot on the property ladder; rather a question of climbing too high up it and suddenly discovering you were afraid of heights. For some, declining property prices were the least of their problems as what was supposed to be their most valuable asset began to to crumble before their eyes due to either shoddy workmanship or the scourge of pyrite.

The Priory Hall debacle, in particular, has laid bare the human cost of light-touch regulation and cowboy building practices. History will recall this disgraceful chapter as a parable of the greedy, vulgar times we lived in.

•The Priory Hall scandal is a shameful legacy of the last boom. FILE PHOTO

The latest news that property is now increasing at a rate not seen since the Celtic Tiger era will bring mixed blessings. Those trapped in negative equity will at least have realistic options if they want to trade down or move on. But first-time buyers will be worried that their hard earned deposits will be quickly eroded by a rising market. The consequence of this is that young couples or families may end up saddled with unsustainable rents in substandard accommodation.

There is also the risk that financial institutions will move in for the kill when they realise they can suddenly break even on the distressed mortgages on their books. Don't be surprised if we see a significant increase in property repossessions as 'the recovery' takes hold.

No doubt Minister for Finance Michael Noonan is watching recent developments in the property market with interest. He would do well to learn from the catastrophic mistakes of his Fianna Fáil predecessors as he prepares for October's Budget.