The beleaguered Irish property market could be flooded with cheap apartments and half built office blocks after the country’s Supreme Court ruled that companies belonging to Dublin’s biggest real estate developer, Liam Carroll, should be placed in liquidation.
Carroll is reputed to have built more apartments in Dublin than any other developer and is also a major investor in the Irish stock market. If his business goes under it would be one of the biggest corporate failures in Irish history.
The court has appointed a provisional liquidator to two companies owned by Carroll after ACC Bank applied for the move as it is owed €130 million by the firms. An appeal by six of Carroll’s companies for bankruptcy protection has been dismissed. His Zoe Group owes more than €1 billion to seven banks.
It is a massive headache for banks owned money by the business. These include Bank of Scotland and Ulster Bank, the subsidiary of the Royal Bank of Scotland that is 70% owned by UK taxpayers and it also has implications for the National Asset Management Agency, the Irish government’s bad bank which is due to start buying up bad property loans from financial institutions.
The NAMA is intended to unwind the crashed property market in an orderly way and allow the banks to start lending again but a large number of properties coming onto the market as the result of the Carroll financial difficulties could cause it a major headache.
There are major concerns that the Irish property market, where prices have already fallen by 75% in some places, could suffer even more damage.
A key to avoiding large number of cheap property coming onto the market will be the value put on Carroll’s property assets and how much of a discount the government will demand when it buys the loans.
It has indicated it will look at the perceived long term value of the property assets rather than pay the current depressed market values.
However, if a sale of Carroll’s assets reveals true market values the government is likely to face criticism that it is overpaying.
