A European-style rental system can only take shape here if pension funds and insurance companies have a change of heart and start buying up apartment blocks

DURING THE boom years, most young executives aspired to buy either an apartment or an investment property. Before that they probably would have settled for a Continental holiday or, at a push, a new car but with the economy soaring and everyone glorying in the increased spending power the urge to buy property was everywhere.

A great many took the plunge, some not even bothering to touch their inflated bonuses once the 100 per cent mortgages became freely available. In all the hype few of the young executives realised that their continued employment was dependent on the boom going on indefinitely. At the same time a great many property developers and mezzanine investors were playing for bigger stakes with the support of bankers equally blinded by the property buzz. Everyone seemed to be under the impression that with the economy so heavily dependent on the construction industry, it couldn’t possibly falter. But fail it did and with the spectacular collapse of the property market, the banking system has also been seriously tarnished, partially because of the currency crisis as much as the undoubted public animus.

The results don’t make for a pretty sight. Most people who acquired property since 2004 are probably in negative equity but it is even worse for many of the investors who bought at the very top of the market and are now hard-pressed to find tenants even at much reduced rents. Some unfortunate buyers who paid deposits and signed contracts just as prices peaked have since attempted to walk away from the properties but one by one they are being cornered by developers and warned that, unless they complete the purchase, they will be hauled before the courts. And that is not the end of their trouble because, down the line, the ECB seems set to bump up mortgage rates in the second half of the year.

The whole sorry mess raises questions as to whether the next batch of young executives coming up the line will be more risk-averse than their older brothers and sisters and choose to rent rather than buy homes. Could this mean that Ireland will finally move towards the European model where most people rent rather than buy residential properties? The next generation of buyers will undoubtedly be more streetwise after watching prices fall by up to 50 per cent despite all the assurances that the market would have a “soft landing”. All they can do is sympathise with their older siblings as they ponder on the likely time span for negative equity. Could it be five years, 10 years or even more before prices bounce back? There is no easy answer.

Despite all the attractions of the European rental system it can only take shape here if the pension funds and the insurance companies have a change of heart and start buying up apartment blocks. This would not be new territory for some of the funds. Irish Life, for example, was for many years one of the largest apartment owners in Dublin, renting homes in many parts of the city including the Mespil Estate beside the Burlington Hotel, Lower Abbey Street and St Stephen’s Green. The Mespil Estate was the first to be sold off in the early 1990s at relatively modest prices.

Irish Life’s exit from the residential market was as badly timed as its decision to cease developing commercial buildings. This meant that after spending decades assembling a massive site at George’s Quay in Dublin city centre and getting planning permission for a high density scheme, it sold on most of it at a knockdown price. George’s Quay is now one of the largest and most successful office developments in Dublin city centre and it is owned not by Irish Life but by the very astute Cosgrave Brothers.

Though a number of overseas institutions are monitoring the Irish market in the hope of picking up undervalued investment properties, there is no indication that they are interested in apartment blocks. The Irish-based institutions are also unlikely to move in so, if there is to be a change in apartment lettings, it will have to come from wealthy individuals or private investment funds. Don’t hold your breath.