LONDON/DUBLIN Land in Ireland 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 the country's bad bank, the National Asset Management Agency (NAMA), are cranking up the sale of land to farmers as they accept some locations are dead to developers, even at bargain prices, property agents told Reuters.
Land zoned for housing that sold for 1 million euros(816 thousand pounds) per acre before the 2008 crash now fetches about 10,000 euros as farmland, or 50,000 euros as development land, said Chris Smith, regional manager for rural properties at auctioneer Gunne.
"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," Smith said.
Spain will no doubt be taking note, as that country 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 percent in some areas. NAMA was set up in 2009 to purge the country's banks of nearly 75 billion euros of risky property loans.
The crash left about 2,000 half-built 'ghost estates' strewn across the country, schemes often given the green light because of investor tax breaks or financial incentives for local authorities but with little thought to long-term viability.
"You had little villages with 100 or 200 souls, a pub, a post office and a chapel and suddenly there were 60 or 70 houses around them, even though the commuting distance to anywhere was too great," said Callum Bain, head of rural valuations and consultancy at Knight Frank in Ireland.
"Quite close to every village in Ireland has a scenario like that."
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 euro zone trading partners, it will increase land sales at farmland prices over the next 12 to 18 months, a spokesman told Reuters.
It will also increasingly finance the demolition of half-built sites for reversion to farmland, the spokesman said, 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 3 million euros in a sleepy village in County Meath," Smith said. "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 euros."
Fortunately, farming is relatively buoyant in Ireland, and dairy farmers are bulking up operations in anticipation of the abolition of European Union milk quotas in 2015.
Farmland prices rose about 5 percent in 2012 and will probably do the same this year, Knight Frank said, and many farmers are now buying back land they sold in the boom.
Two farmers from Mallow, County Cork, in west Ireland, paid about 2.25 million euros last year to buy 180 acres of land from a developer who paid them 40 million euros 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's bad bank, known by the acronym SAREB, was set up at the end of last year to buy 90 billion euros 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 land in undevelopable areas or because demolishing what is there to start again is too costly, said property consultants Jones Lang LaSalle (JLL.N) and CBRE (CBG.N).
About half of all development land in Spain will eventually revert to farmland at writedowns of 90 or 95 percent from the last peak in 2007, said Rafael Powley, a Madrid-based director of strategic consulting at property agent JLL.
"It will take SAREB a few more years to look at things in the way NAMA is now," he said. "You can't think that way at first because you try to sell your best assets and Spanish banks don't earn enough money to make those provisions at the moment."
The worst affected areas are near Madrid, in places like Toledo and Guadalajara, where sites may revert to cereal farms, and areas on the eastern coast that were popular among Spaniards for second homes, such as Murcia and Almeria, where fruit and vegetable farming is now the likely option, Powley said.
"This Spanish banking crisis is not about exposure to real estate. It's about exposure to land," he said.
In addition to land, Irish farmers are running the rule over the country's golf courses, as the cost of converting them to farmland is not as high as for half-built developments.
One 18-hole course farmers have looked over is the 144-acre Turvey Golf & Country Club in north County Dublin, which went into receivership in 2010, said selling agent Savills (SVS.L).
Surrounded by farmland and housing estates, it was built in 1995. The fairways and greens are now overgrown, and the weed-choked first tee sits in front of a rotting clubhouse where concrete shows through holes in navy blue paint.
"It's an absolute disgrace that a beautiful course like that has turned into a mess," local resident Harry Gates told a Reuters reporter on Thursday. "It doesn't look like anybody will be swinging a club there again."
(Additional reporting by Stephen Mangan; Editing by Will Waterman)