Irish property dam about to burst

| 1 June 2008 06:36

Along with the residential housing bust in Ireland, a commercial real estate (CRE) bust is definitely on the table. According to the newspaper the Irish Independent up to 10 billion euros of writedowns are possible for the Irish property developers and banks.

The most worrying part about a CRE bust is the potential that individuals have unknowingly invested, through pension schemes, in products related to CRE loans, which will decline significantly in value as the bust takes hold.

Ireland, along with Spain and the UK, is the next stop on the credit writedown bus.

“Irish developers and banks are staring into a black hole of at least €10bn as the gravy train of shopping centre and office developments heads for what many believe will be a massive crash.

This black hole — which will become a reality this year if, as Davy predicted in its report last week, the value of Irish commercial property dives 20 per cent from its peak — will create unforeseen headaches for many.”

-The Sunday Independent, 01 June 2008

Banks with the most exposure are AIB (Allied Irish), UlsterBank/RBS, and Anglo Irish.

avatar About Edward Harrison

Edward Harrison is the founder of Credit Writedowns and a former career diplomat, investment banker and technology executive with over twenty years of business experience. He is also a regular economic and financial commentator on BBC World News, CNBC Television, Business News Network, CBC, Fox Television and RT Television. He speaks six languages, a skill he uses to provide a more global perspective. Edward holds an MBA in Finance from Columbia University and a BA in Economics from Dartmouth College.

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2 Comments

  1. avatar Alice Cook says:
    1 June 2008 at 09:28

    Today’s property crash is tomorrow’s banking crisis.

    Alice

  2. avatar Edward Harrison says:
    1 June 2008 at 14:46

    I agree 100%. And RBS is looking very dodgy as a credit risk. No wonder they’re raising so much money. What would be interesting to know is what type of exposure the British banks have in Spain because that would be yet another market they are exposed to.

    I’m beginning to think the banking crisis in the UK could be as bad as in the US.