Real Estate in Ireland as Compared to U.S.

Ireland is the third largest island in Europe and the 20th largest island in the world. The island is divided between the Republic of Ireland and Northern Ireland. The population of Ireland is approximately 6.2 million people and population is split by an estimated 75% in the Republic and the remaining 25% in Northern Ireland. Dublin, with just over 1 million residents is the largest county on the island. The official languages are Irish and English, with English being the current dominant primary language. Ireland has a 99% literacy rate and high rankings for its education system, political freedom and civil rights, press freedom, economic freedom and quality of living.

The financial crisis in Ireland began in September 2008 when the Irish government guaranteed €440bn worth of liabilities for six Irish financial institutions. A little over two years later in November 2010, the Irish parliament accepted a bailout from the International Monetary Fund (IMF) and the European Union (EU) totaling €85bn, which equates to $114bn in US dollars. Close to 40% of the bailout funds are being earmarked for the six Irish owned banks. The Irish Banking Industry Country Risk Assessment was downgraded to a 6 from a 4 and the rating agencies have since lowered the rating of Ireland from an A- to a BBB+ by Standard and Poor's, Moody's rated Ireland a Baa1 and a Fitch provided a rating of BBB-plus. As Doyle stated "indebtedness for Ireland, which sought a bailout in November, will surge to 125 percent of gross domestic product by 2013, the IMF forecasts. Debt was 25 percent of GDP in 2007" (Bloomberg).

Real estate in Ireland is currently in much turmoil due to the economic crisis that the country is suffering through. From 1995-2000, known as the "Celtic Tiger" period in Ireland, the economy grew at an accelerated rate of 9.6% per year. Irish wages increased close to five times larger than the average of other countries in Europe and the exchange rate increase by 36% from 1999 to 2008. The phenomenal growth created an influx of new construction of all asset types of real estate and was enhanced by the loose regional rules that restricted new development in the towns of Ireland. Those rules were set by the local authorities, which has since been taken over by the Minister of the State who stated "over zoning and bad planning played a fundamental role in creating the property bubble"(www.archiseek.com). The real estate bubble burst in Ireland was caused by the same basic principles which caused a bubble burst in the United States, a large push by government to increase ownership awareness, lax regulation of lending practices in mortgages and predatory lending practices via adjustable rate mortgages that led to increasing number of defaults in residential markets.

Real estate in Ireland, as it compares to the United States, is going through major changes, most importantly the role of government in the establishment of the National Asset Management Agency (NAMA). NAMA will act as the country's property manager responsible for the disposition of assets held by the banks that have folded during this crisis. The similarities lie in how the United States treated the failure of the Savings & Loans institutions of the 1980's and early 1990's in that the US created the Resolution Trust Corporation (RTC) to liquidate the assets, primarily real estate assets, that had been held by the S&L's that were declared failures and insolvent by the US government.

Property taxes are prevalent in the US and are the primary funding to how local government operates. Ireland repealed the property taxes charged to owners in 1997 and even in this deficit the government does not foresee a return to property taxes. In the United States, a borrower elects to accept a mortgage in order to acquire property, in Ireland, the purchaser assumes the mortgage held by the property. Mortgages are tied to the property and not to an individual. Duty taxes, which are similar to documentary taxes in the US, are charged to the purchaser at the time of purchase and the amount paid depends on the purchase price. Eminent domain also exists in Ireland under the Compulsory Purchase Order (CPO).

Deeds and titles have been a significant issue in the history of Ireland. Absentee landlords were a large problem in the 16th & 17th century in which the Catholic Church confiscated land from absentee Irish landlords and given to the British nobles and British settlers by the Church of England and Church of Ireland. This was the main reason why Ireland has very established real estate laws regarding ownership and created two registries for title, Land Registry and the Registry of Deeds. Rural land tends to have registered title while many urban areas are not registered. Ownership transfer in Ireland is conducted via conveyance, which can be a costly and timely process and the costs are absorbed by both seller and buyers. In the US, deliverance and registering a title transfers ownership. Insurance requirements are very similar to the US with both countries requiring property, flood, and mortgage insurance.

Real estate contract processes are very different. In the US, once a priced is agreed and a contract is executed and delivered, the buyer and seller continue towards the goal of acquisition and disposition. In Ireland, the seller can continue to accept higher bids until closing. Also, seller can accept more than one offer as long as both parties are notified. Leasing is called "letting" in Ireland. Ireland has very strong pro-tenant laws which are similar as those in the US and eviction requires a judicial process. In commercial leasing, a typical short term lease is approximately 5 years in length while long term leases are 20-25 years in length and contain break options. It is uncommon for a landlord to seek a security deposit as a guarantee of rent payments. However, landlords do seek a third party guarantee. Unlike the US, the commercial leases in Ireland contain language that requires the tenant to carry full responsibility of repairs and insurance. Common area maintenance (CAM) billing is common in both countries and tenant responsibility as part of the leases. Tenant occupancy over five years guarantees the tenant the right to renew the lease which is different from the US where options to landlord and/or tenant are provided with proper notice of intent.

Real Estate Agents in Ireland are called Auctioneers, Estate Agents or Property Consultants and are licensed and regulated by an accredited body. A Multiple Listing Service (MLS) does not exist in Ireland and many agents adhere to the "culture of secrecy". Very few photographs of properties available exist and prices of purchases are rarely disclosed as advertised sales usually appear with the preceding words "in excess", "well over", or "region of" in order to describe the purchase price. Commissions are generally between 1.5%-3% and there aren't any cooperating brokers as the listing agent will usually find the buyer. In the United States, commissions are between 4%-6% and cooperating brokers do exist. Mortgage loans are quite the same as they exist in the form of fixed, variable