One side effect of the exceptionally buoyant Irish property market which made areas of Dublin as expensive as central London was a similar rise in value of their country houses. Now with the drastic drop in property values, Irish country houses have proven to be far from immune and offer a useful indicator of what might happen in a similar situation on this side of the Irish sea.
The country house market in Ireland truly rode the boom when property became a sure-fire route to riches in the republic. Houses which had been neglected for many years were suddenly ‘discovered’, bought and lavishly refurbished as private houses for the newly wealthy. This is actually unsurprising as a key aspiration for anyone acquiring riches over the last 400 years has been to establish themselves in a rural domain. Owning land was the route to power since time immemorial with greater acreage giving greater influence. Despite the breaking of that link in the UK between 1870 and 1920 (and most decisively with the passing of the Lords Reform Bill of 1911) the idea of the country estate as the acme of achievement had become embedded as the ultimate status symbol. Therefore any boom in the economy has usually led to a rush to the country.
Ireland’s situation was slightly different in that, unlike in the UK with it’s stricter planning laws, the purchase of a country house was also viewed with residential development potential in mind. For those projects which completed this meant that the house was simply a means to an end leaving fine houses stranded in the middle of a new suburb (many of which are now half-empty) thus ruining a perfectly good house. This also meant that some houses were bought with over-inflated ‘development value’ built into the price.
So now the crash has hit, what has happened to the houses? For those owners who were simply in the family home and managed to sell a few acres for development they have ‘won’ as they still have their house and estate but also gained money to sustain the estate and complete much needed restoration and improvements. For others who didn’t capitalise there must be a certain disappointment as they’ve gone from lying in bed thinking about how the house is now worth ten times what it was a few years ago, back to lying awake wondering how to pay the bills again.
Worse though are those who paid hyped prices and now are stuck either with a home they may have paid for but which is now worth much less than they paid for it – country houses prices can race ahead of the trend in a bull market but can easily do the same when it falls. On a positive note, for those owners who can afford to, they are likely to stay longer than otherwise they might, providing stable ownership and perhaps a commitment to invest in the estate to sustain what value they can. For those who bought on finance or who now lack the funds to meet the running costs they may now be forced to sell at a loss. Declines of 30-50% aren’t unheard of, even for the very best properties. The Lyons Demesne, one of the finest estates in Ireland and former home of Tony Ryan, founder of Ryanair, is currently for sale with 600-acres at €50m, down from its former valuation of €80m. Even on the less stratospheric level, Bellamont Forest, the first Palladian house in Ireland (and ridiculously beautiful) was initially marketed at €10m but is now offered at €7.5m.
So what could happen over here? UK country houses prices, certainly for the best properties, have risen dramatically over the last 10-20 years. However, that rise has been on the back of a broader boom in the economy which, despite some aspects turning out to be smoke and mirrors, did actually generate real money. In addition, the commodity value of UK farmland which has risen from £2,000 per acre to around £7,000 per acre has also provided a stronger capital base for the estates. The natural British caution does have its advantages.
The dangers are where owners are left with over-priced houses unable to meets the cost of maintenance and there is the risk that basic tasks are put off leaving the houses at risk from any number of ailments such as water ingress due to blocked gutters. Unfortunately government austerity means that at a time when local councils need to be most vigilant they are going to be less likely to fund the necessary heritage conservation staff.
Country houses are never immune from the challenges of the wider economy but they can also be insulated if the owner has the resources to weather the storm. Luckily for the UK, many owners are in a strong position but there is always the danger that the over-excited may get carried away and over-pay leading to problems if the property market weakens. The situation in Ireland should be watched as a useful case study in the dangers of an over-heated market.
Full story: Crash-landed gentry [ft.com]