Who gained from the bubble

Apologies if this has come up before here, but I just find this an intriging question that I’m still unclear on. If this has already been done to death, a link to the relevant thread would be appreciated.

I raised this question elsewhere, but it struck me that people here would very likely have interesting views that are worth seeing.

What sparked the question was a story about a developer paying €115 million in 2007 for the Grafton Street shops occupied by River Island and Wallis. That developer might now be worried, but it occured that someone must have the €115 million. In this case, it seems to have been purchased from Arnotts. In the case of the Glass Bottle Factory site, the beneficiaries of the sale seemed to be Dublin Port and some crowd called South Wharf plc - who apparently were the operators of the Glass Bottle factory.

So why don’t we hear more of that side of the equation? I mean, if we read that such-and-such a developer is in liquidation because of paying too much for sites, surely someone somewhere else should be sitting quite happily on a large bag of money.

Anyway, any comments greatly appreciated.

Much of the wealth was illusory. E.g. suppose there are ten houses in an estate. Selling for 100k each. Let’s imagine that there are no mortgages (old estate, paid off). That’s one million in total “wealth”. Now suppose one sells for 200k. Suddenly there seems to be two million in total wealth. People behave as though they’re wealthier. (Remortgaging, etc.) But when the bubble bursts it turns out that the only person to benefit was the lucky seller for 200k. There may appear to have been an extra million in value. But it was never real.

According to economist Moore McDowell 90% of the increase in government revenue from 2000 was spent on 2 areas:
(1) Increases in public sector wages
(2) Increases in social welfare payments

I would therefore redirect your question to the following 2 individuals:
(1) David Begg
(2) Fr. Sean Healy

Some builders who bought up most of the development land ages ago, like the Bailey bros and Durkans to name but 2, made an absolute fortune duing the boom. Built and sold thousands of homes, and must be sitting on billions. As far as I know a handful of individuals (still) own most of the prime development land. They hardly got stung when it all blew up. The hundreds of millions which were borrowed to pay for sites in Ballsbridge or wherever are swelling somebody’s bank account somewhere, I’m sure.

I have a horrible feeling that a lot of it was invested in Irish shares and so was effectively shipped to those smart money men in London who were shorting Irish banks.

I asked that same question here:

thepropertypin.com/viewtopic.php?f=54&t=26967&p=332436&hilit=coulson#p332436

to a resounding lack of interest! :smiley:

Maybe it would need a very dedicated investigative journalist (gavinsblog perhaps) to follow the money trail - it can’t ALL have disappeared in a puff of logical smoke?

My brain starts to hurt when I try to move from thinking in terms of used €50 notes and bars of gold to more nebulous stuff like “financial instruments”.

The fact that our banks need to be recapitalised to such a serious extent despite the money flows that occured must be a pretty good indicator that the money has taken flight to other lands and is not sitting within these shores. Probably through things like share purchases etc as pointed out by another poster.

https://www.mapsofworld.com/images/world-countries-flags/germany-flag.gif https://blogs.fayobserver.com/faytoz/files/2009/05/old-people-crossing.gif

1/ Government in the form of stamp duty and other taxes ( which bertie ahernia proceeded to squander on social partnership and welfare)
2/ Anybody who sold and didnt buy or possibly downsized
3/ People who sold land for developement from landbanks and also I would assume that includes farmers (probably on advice from their bank manager who then advised them to invest in bank shares and other proerty deals the bank was promoting)
There are probably lots of others who benefited and lost it as a result of bad advice.

Would that show up anywhere? What I mean is I can dimly remember news articles about how Irish investors were buying more property in London than Saudis (or whoever). If that’s where the money went, we should be able to trace it through assets owned abroad by Irish residents, or something.

You don’t put that kind of money in a bank account. Instead you buy bank bonds and get a far greater return. The manner in which FF are determined to protect the bondholders suggests to me that this is where their patron’s cash is.

Okay, let’s start doing some sums.

I’ll start with cars.

[code] Passenger Commercial Heavy Buses Total/year
2006 178,826 40,591 5,895 403
2005 171,732 36,844 4,858 272

Average €15,000 €20,000 €40,000 €80,000
2006 €2,682,390,000 €811,820,000 €235,800,000 €32,240,000 €3,762,250,000
2005 €2,575,980,000 €736,880,000 €194,320,000 €21,760,000 €3,528,940,000
[/code]

The average is a wild guess at the average price, that is, the import price. Any corrections/clarifications welcome.

Since we make, eh, 0 (zero) cars in this country, over 3 bn (three billion) a year of wealth left the country each year. Or rather, it would have if they were bought with cash. Many were bought with credit, so 3 bn (three billion) of cash plus interest will leave the car over the next 3-5 years after the car was registered.

Unless of course, you took an equity release for the car. In which case, it will be 20, 25, 30, 40 years before the negative wealth effects of buying the car disappear, with the best case being that you paid almost twice the price of the car (taking interest payments into account) and the worst case, eh, somewhere above that!

Now, how many plasma nike ipod smeg laptops in everyroom did we buy?

How about turkish trabertine? (whatever that is).

What proportion of a house is built with Irish materials?

What proportion of the interior kit-out is?

How much do those german taps cost? How much!?

Some of it is just stuff that we don’t make (because the domestic market is too small and the international market too competitive). Much of it is bling. The part that isn’t either of the above, is tat.

So, where did it all go? We spent it. If it wasn’t on stuff, it was on coke and booze and foreign holidays. Some, at least, was well spent on golf and spa holidays in the country (however much we denigrate the ridiculous tax concessions, it is at least spending within the economy).

And that’s before we even get to the pyramid.

From Turkish travertine to Anglo Irish…business.timesonline.co.uk/tol/business/industry_sectors/construction_and_property/article5554017.ece

Anecdotal: my Da was telling me of a local farmer who sold his land, put it in bank shares, lost the vast majority of it and now is unable to pay Revenue the tax he owes.

I think the tax bit is probably rubbish. The tax is due in the year the land is sold.

The rest of it is, sadly, entirely creditable. Irish retail financial advice has the depth and breadth of experience as a goldfish bowl. The advisor usually has a memory to match…

That’s fine, and broadly credible as a starting point. But it would strike me that this explanation would need to be fleshed out. (I’m not suggesting by you - I imagine that like me you’ve to spend days making a living, I’m more thinking of the absence of analysis and comment by the media).

First up, as you say, much of that expenditure was funded by credit. So I’d expect that if we added up all the money spent on holidays and cars and so forth, we’d need to deduct the increase in non-mortgage related personal credit to see the amount that might be accounted for by gains from selling land.

Now, you’ll understand, I’m not suggesting that all that speculative gain was sensibly invested. All I’m really saying is I’d like to see it boiled down as precisely as possible. For the sake of argument, Dublin Port seemed to get a one third share of the €412 million paid for the Glass Bottle Factory. That’s nearly €140 million. So where is that? It must be somewhere on their balance sheet - and presumably they didn’t just take it and buy a Porsche for each of their staff.

I think an awful lot of the guys who appeared to making a lot of money have blown it and are probably bankrupt…in 2007 they all rushed into UK commercial property on a leveraged basis and then sterling dropped 10 - 20% and also the market by 40% in the meantime.

Derek Quinlan and the kingspan could fall into this category.

Most of them became too cocky and believed there own hype …i think the refurbishment of shelbourne hotel cost something
like 1 million per bedroom …so for that to pay intrest on a loan at 6% would require 60,000 euro profit per room
or 200 euro per night.

It is frightening how deluded the guys came.

A lot of these struggling guys still own houses on shrewsbury road and i am sure have cash salted away somewhere
and may end up bouncing back to some degree like larry goodman who was seriously broke at one stage but
because he owed the banks so much they had to work with him. Little guy does not get this chance.

I still think a lot of guys yet to fall who will fall…

THehe doyle who owned jury are obvious gainers and NTR guys …who may be interrellated.

You could say the gainers are the peoples salaries who jumped in boom but did not borrow …employees
in banks have not felt the pinch yet …staff in insurance companies who managed to lose a lot of peoples
wealth in their pensions have not felt the pinch yet… .GP’s charging exorbitant prices…

Solicitors and accountants stil charging boom prices but i assume their general business has been hit.

I think this is a really good question because there seems to be a prevailing view out there that there’s a huge pot of money and we just need to find a way to get a slice of it to recover our public finances - Vincent Brown never stops harping on about how we are “one of the richest countries in the world” (& when Jim Power tried to inject some economics 101 into the discussion VB didn’t want to know).

Anyway to me this is one of the things holding us back from recovery now - the idea that we really are “rich” and this recession thingumy-bob is just a bad dream that will go away quite soon…

My view is that we (most of us) were not really rich - the trappings of riches (new cars, bigger houses) do not make people “rich” even though they might appear so. So lots of people are still living in the big houses and driving the big cars, but a lot of them cannot support this lifestyle (and arguably never could). It’s a bitter pill to swallow to recognise that we were not all that talented after all - we just got caught up in a massive asset-bubble. It’s a pill Irish people generally don’t want to swallow.

Of course a few crafty people made a killing - that’s always the way.

Interesting. A female friend of mine decided to do some volunteer work back in 2005.
She had a stint with St. Vincent De Paul.
I remember asking her what kind of people were they helping given we were supposedly in a boom ?
She said that post Xmas there were families who overspent on Playstations / cigarettes / nikes / man U. tops etc would come looking for handouts.
They were of course given cash.
This was repeated year after year.

I wish I had read this before making my donation this year. I always thought it was some poor lad on the street who would get a hot meal etc not some family putting little Johnies playstation before food XX