Talking Property

The State was a bad parent, says ISABEL MORTON

I’VE OFTEN referred, half in jest, whole in earnest, to the likelihood that the blame game would get underway and that everyone would start suing everyone else until eventually, the Irish State would have to accept responsibility for the bank crash. And, it looks as if that might happen if the Irish Property Council (IPC) gets its way, as last week it announced its intention to take the Irish State to court.

The IPC is an organisation, which represents a broad range of people in the property business, including builders, developers and investors. (And, before you go into hysterics; this organisation represents everyone from the small guy with one little investment property, to the much-hated big-time developers who once owned vast property portfolios.)

The IPC’s main bone of contention is that borrowers are the only ones being held responsible for the Irish property crash. Bankers, the financial regulator and the government appear to have got away scot-free, despite the fact that they were “the creators of the collapse”. Many of them have admitted this and some have even apologised for it but none has suffered because of it.

The IPC is in no way trying to exonerate borrowers from their share of responsibility for the property bubble but it emphasises the word “share” and its members believe that it is grossly unfair that so far, neither the banks nor the government have accepted any “share” of blame, whatsoever.

Indeed, the council clearly states that it considers that the borrowers should be at the top of the list of those responsible. However, it proposes that a court case is required “to identify to what extent the banks are responsible through their reckless lending and the (Irish) State is responsible through their lack of regulation and (their) incompetence”.

Now, before the “anti-property-investor-brigade” amongst you go into a complete spin about how property people deserve to be hammered and you remind us for the umpteenth time how well the same people did during the boom, let me remind you that the vast majority of the people the IPC represents are very ordinary individuals, who were enthusiastically encouraged to invest in property by both the banks and the Irish State.

Also, you might just consider for a moment that although you may not have invested in property over the last decade or so, many of your family, friends and acquaintances did.

Why, one might wonder, did so many Irish citizens suddenly become such enthusiastic property investors? If you believe that the answer to that question is that the nation became greedy, avaricious and materialistic, you might well be correct. But, how did that suddenly happen? What brought on the sudden rush of greed?

It happened because it was allowed to happen. Banks happily lent to all those who wished to borrow and the Irish State condoned all this borrowing, indeed it actively supported and encouraged it.

Is it not the responsibility of the State to protect its citizens from others and indeed, on occasion, from themselves? Is the State not expected to act with due care and diligence?

Take the example of parents (the Irish State), who had shares in a fast-food business (stamp duty) and permitted their child to eat a lot of junk food, indeed, facilitated its consumption by providing little else for the child to eat and compounded it by giving bad example, regularly indulging in fast food themselves.

Imagine if the parents were fully aware of the fact that this unhealthy food was also readily available in their child’s school canteen (the banks) and they never bothered to check with the school principal (the Financial Regulator) to make sure that their child wasn’t eating too much processed, pre-packed rubbish.

Then picture the situation where the children become so obese they all become ill, attendance levels drop and school fees increase. The fast food company no longer sells as much junk food and in turn, the parents’ shares in the company become almost worthless. In addition to subsidising the school fees, the parents must also pay for school games instructors and nutritional therapists.

So, the parents decide that the quickest and cheapest way to get their child back to “normal” weight is to starve it, despite being fully cognisant that their unfortunate offspring may not actually survive such extreme deprivation.

A ridiculous analogy perhaps, but in effect, this is what happened. The Irish State behaved like an irresponsible parent to its children, the Irish citizens. Having fed them nothing but junk food for years, they are now starving them to death.

And now the Irish Property Council is looking for a perfect example of a starving child (a plaintiff); “someone who has lost everything through participation in the property market, either through construction, development or investment” in order to take a class action in the High Court against the Government, the Financial Regulator and the banks over their roles in the collapse of the property market. I doubt they’ll have a problem finding one in the long lines of starving children which make up the country’s dole queues.

ISABEL MORTON

is a property consultant