Have you noticed the way Irish property investors are like Man Utd supporters? Last week, the poor Man Utd supporters trending on Twitter swung between optimism and anger. Deep down, both emotions come from the belief that a couple of results back to back must signal a return of the glory years. The hurt this week at being demolished by Man City is more a function of believing in the divine right of United, rather than an honest assessment of a world that has changed.

As result of these denials, when United beat some Greek outfit at home and Wayne Rooney manages to lob an off-form West Ham keeper, the Stretford Enders rally around each other singing ”Glory, Glory Man Utd, dreaming of former glory when the reality is they have just beaten two second raters.

Similarly, the Irish property investors, the ones who are not bankrupt, see a few months of slightly rising prices as being the signal that the new boom is under way.

Like the United fans, they tend to be driven by memory, rather than reality. Aided and abetted by the forces of hype, the banks, the estates agents and the property pornographers in the media, the entire property apparatus whips itself into hysteria.

The utterances and editorials from these jaundiced sources are like reading the manager’s note in a match programme, or relying on a fanzine to give you an assessment about the true strength of a team. The fanzine approach to property postulates that property could again move back to the glory years of 2006.

At the more effervescent end of the property market (usually the ones whose balance sheet is most damaged), investors want to get back to the ra-ra days of the glossy brochure, 100 per cent mortgages and mezzanine financing deals. Now, while they will never say this openly and are sensible enough to deny this in public, this is what they hope for. They pray for the day when fear is replaced by greed once more.

Yet, similar to the chastened United supporter, they realise that expectations count and they all protest that the market doesn’t need to go back to the boom years but rather make a “transition” to something more “sustainable”.

The watchword is now sustainability. Sustainability has a ring to it, but there’s a smugness to the word because it means that while we have recovered from the trough and we are all being well behaved now, there are just enough fees for all the various snouts – from financiers, lawyers and large estate agents – to hoover up without appearing greedy.

All the while, during the period of sustainability, big trophy property deals are bragged about in order to send a signal further down the property food chain of just what might be coming down the tracks for those in the know.

These trophy deals are the Champions League fixtures of the property game and even though United can’t even beat Stoke, their fans can still claim to be in the Champions League and salivate over the clash with Bayern Munich. Similarly, the Irish property apparatus clings onto the presence of some hedge fund or other as being symbolic of the big time ahead. So the likes of Kennedy Wilson buying a funky building on the docks is the commercial property equivalent of a Champions League clash against Bayern. It is a trophy symbol of past triumphs, rather than a reflection of the true state of the environment.

So what’s the true state of the market for commercial property based on analysis in Ireland?

The first thing to realise is that there is no credit in the country. Ads from the banks may try to say the opposite, but the numbers don’t lie.

If you look at bank lending in Ireland, it has not only collapsed, but also continues to contract.

Therefore, the main source of financing in the country is foreigners. These guys are borrowing in yen at zero interest rates in a currency that is falling against the euro – which is great if you have debts in yen and assets in the euro. They buy the Irish commercial property assets and because of the exchange rate dynamics, even if the Irish asset yields nothing, they get a deal. But the asset does yield something since rents in Dublin at least are firm.

This excludes the local buyers from the deal, because if the locals have to borrow, they will automatically be 5 per cent down against the foreigners. So what you need to be more than anything else to partake in the great Irish commercial property sale is non-Irish!

Now do you think the foreigners are natural long-term owners of Irish property? Of course not – we are! And these leveraged guys have at most a three-year time horizon to flip the asset, pick up their 30 per cent price profit and scarper. So who will buy this stuff from them? Irish investors will, but not at the discounts that exist today or existed yesterday but at massive premiums to today’s prices. And who will finance these deals? Why, the recapitalised Irish banks in a few years! So we will end up with a banking system once again exposed to expensive Irish property ten years after a property bust destroyed the banks.

Interestingly, what agency has most say in this process, which will put the Irish banks deep into the property market at high prices once again? Well, of course, Nama will be the main player in this game. So an arm of the Irish state financed by Irish taxpayers will actively give foreigners the best deals and when they sell after they have got their upside, the more expensive, and therefore more risky, asset will be bought by Irish players financed by banks which are owned by the taxpayer, who owned the assets in the first place!

You couldn’t make it up.

This is the equivalent of Man United selling its best players to pay the debts of the club, allowing the club to falter and watch these players help other teams to glory at United’s expense. Then when United are battling relegation a few year hence, they buy back these players who are old and over the hill, hoping that their experience will help them avoid the drop.

Once they avoid the drop, the salad days of the treble are in just in sight again.

Glory, glory!

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