Ghosts of bubbles past

Source: Bloomberg

An encouraging revelation is now underway in southern Ireland: they are admitting the mistakes made in their housing bubble and finally getting to work clearing out the debris. I am reminded of similar steps taken in Las Vegas a couple of years ago where they began bulldozing partially built subdivisions.  See this clip.

“About 1,850 housing developments, unfinished after the bubble burst in 2008, pockmark the Irish landscape, according to government figures. This week, Ireland’s National Asset Management Agency, the state agency set up in 2009 to purge banks of their most toxic commercial property loans, started the destruction of an apartment block for the first time.

“There’ll be some places where the most sensible decision that can be made will be to demolish,” Housing Minister Jan O’Sullivan said in an interview in her Dublin office on July 10. “If nobody wants to live in them, then the most practical thing to do possibly will be to demolish what is there.”

The so-called ghost estates are the most visible scar left by Western Europe’s worst real-estate crash, which led Ireland to follow Greece in seeking international financial help. In all, about 15 percent of Irish homes are vacant, the country’s statistics agency estimates…

About 553,000 houses were built in the 10 years through 2005 in the country of about 4.5 million people, as homebuilding expanded at twice the pace of the rest of Europe. About 294,000 homes now lie empty, as prices halved. In Dublin, prices have dropped 64 percent from the 2007 market peak, according to Irish real estate agent Lisney in a report this week.

“There wasn’t proper planning, wasn’t proper control and there wasn’t proper regulation of lending institutions,” said O’Sullivan, 61, who took over as housing minister in December. “We have had a very salutary and very hard lesson.” See: Ireland bulldozes ghost estates in life after real estate bubble

Some of “substantially completed” developments will be finished and potentially sold or used for social housing, others will be demolished and the land returned for farming. Now we are finally getting to some actual clean up of a broken system.  This is all moving in the right direction: admit, repent, reform.

Next step is to get the bankers to admit that trillions of dollars in their own asset holdings-bonds and other derivatives that were levered off of the realty bubble–also need to be bulldozed and written off as noncollectable. And no sorry, the taxpayers cannot make you whole for your mistakes.