By Tom Bill, Reuters
Land in Ireland once earmarked for homes and offices is being sold at knockdown prices to farmers, sometimes the same farmers who made fortunes selling it in the boom years, as swathes of the country return to its agricultural roots.Irish lenders and Nama are cranking up the sale of land to farmers as they accept some locations are dead to developers, even at bargain prices.
Land zoned for housing that sold for €1m per acre before the 2008 crash now fetches about €10,000 as farmland, or €50,000 as development land, according to Chris Smith, regional manager for rural properties at Gunne auctioneers.
“Development won’t come back for a generation in some parts of Ireland, and the banks and Nama aren’t willing to wait a generation,” he said.
Nama has sat on most of its property loans since 2008 in the hope values would improve but, against the backdrop of anaemic economic growth and turmoil among its eurozone trading partners, it will increase land sales at farmland prices over the next 12 to 18 months, according to a spokesperson.
It will also increasingly finance the demolition of half-built sites for reversion to farmland, the spokesperson added, declining to say what slice of its loans this represented. Discounts are likely to be huge.
“In 2006, five and a half acres of land with zoning for residential was sold for €3m in Co Meath. The same piece of land, plus a cottage on half an acre and another 20 acres, is about to come to the market for €200,000,” Mr Smith said.
Fortunately, farming is relatively buoyant in Ireland, and dairy farmers are bulking up operations in anticipation of the abolition of EU milk quotas in 2015. Farmland prices rose about 5% in 2012 and will probably do the same this year, and many farmers are now buying back land they sold in the boom.
Two farmers from Mallow paid about €2.25m last year to buy 180 acres of land from a developer who paid them €40m for it in 2004.
“It suited my pocket,” said one of the farmers, 76-year-old John Cronin. “I know quite a number of farmers that are looking out for land. There’s a great love for it.”
Spain will no doubt be taking note, as that country has just started cleansing its banking system of toxic property loans. Spain and Ireland suffered Europe’s worst property crash, with prices falling more than 50% in some areas.
Spain’s bad bank, known by the acronym SAREB, was set up at the end of last year to buy €90bn worth of discounted property assets from banks to sell off over 15 years.
It will struggle to find buyers for about two thirds of the assets as they relate to areas that cannot be developed or because demolishing what is there to start again is too costly.
About half of all development land in Spain will eventually revert to farmland at writedowns of 90% or 95% from the last peak in 2007