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By Tom Bill
LONDON/DUBLIN, Jan 18 (Reuters) - Land in Ireland earmarkedfor homes and offices is being sold at knockdown prices tofarmers, sometimes the same farmers who made fortunes selling itin the boom years, as swathes of the country return to itsagricultural roots.
Irish lenders and the country's bad bank, the National AssetManagement Agency (NAMA), are cranking up the sale of land tofarmers 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 ($1.3million) per acre before the 2008 crash now fetches about 10,000euros as farmland, or 50,000 euros as development land, saidChris Smith, regional manager for rural properties at auctioneerGunne.
"Development won't come back for a generation in some partsof Ireland, and the banks and NAMA aren't willing to wait ageneration," Smith said.
Spain will no doubt be taking note, as that country juststarted 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 wasset up in 2009 to purge the country's banks of nearly 75 billioneuros of risky property loans.
The crash left about 2,000 half-built 'ghost estates' strewnacross the country, schemes often given the green light becauseof investor tax breaks or financial incentives for localauthorities but with little thought to long-term viability.
"You had little villages with 100 or 200 souls, a pub, apost office and a chapel and suddenly there were 60 or 70 housesaround them, even though the commuting distance to anywhere wastoo great," said Callum Bain, head of rural valuations andconsultancy at Knight Frank in Ireland.
"Quite close to every village in Ireland has a scenario likethat."
NAMA has sat on most of its property loans since 2008 in thehope values would improve but against the backdrop of anaemiceconomic growth and turmoil among its euro zone tradingpartners, it will increase land sales at farmland prices overthe next 12 to 18 months, a spokesman told Reuters.
It will also increasingly finance the demolition ofhalf-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 forresidential was sold for 3 million euros in a sleepy village inCounty Meath," Smith said. "The same piece of land plus acottage on half an acre and another 20 acres is about to come tothe market for 200,000 euros."
Fortunately, farming is relatively buoyant in Ireland, anddairy farmers are bulking up operations in anticipation of theabolition of European Union milk quotas in 2015.
Farmland prices rose about 5 percent in 2012 and willprobably do the same this year, Knight Frank said, and manyfarmers are now buying back land they sold in the boom.
Two farmers from Mallow, County Cork, in west Ireland, paidabout 2.25 million euros last year to buy 180 acres of land froma developer who paid them 40 million euros for it in 2004.
"It suited my pocket," said one of the farmers, 76-year oldJohn Cronin. "I know quite a number of farmers that are lookingout for land. There's a great love for it."
Spain's bad bank, known by the acronym SAREB, was set up atthe end of last year to buy 90 billion euros of discountedproperty assets from banks to sell off over 15 years.
It will struggle to find buyers for about two-thirds of theassets as they relate to land in undevelopable areas or becausedemolishing what is there to start again is too costly, saidproperty consultants Jones Lang LaSalle and CBRE.
About half of all development land in Spain will eventuallyrevert to farmland at writedowns of 90 or 95 percent from thelast peak in 2007, said Rafael Powley, a Madrid-based directorof strategic consulting at property agent JLL.
"It will take SAREB a few more years to look at things inthe way NAMA is now," he said. "You can't think that way atfirst because you try to sell your best assets and Spanish banksdon't earn enough money to make those provisions at the moment."
The worst affected areas are near Madrid, in places likeToledo and Guadalajara, where sites may revert to cereal farms,and areas on the eastern coast that were popular among Spaniardsfor second homes, such as Murcia and Almeria, where fruit andvegetable farming is now the likely option, Powley said.
"This Spanish banking crisis is not about exposure to realestate. It's about exposure to land," he said.
In addition to land, Irish farmers are running the rule overthe country's golf courses, as the cost of converting them tofarmland is not as high as for half-built developments.
One 18-hole course farmers have looked over is the 144-acreTurvey Golf & Country Club in north County Dublin, which wentinto receivership in 2010, said selling agent Savills.
Surrounded by farmland and housing estates, it was built in1995. The fairways and greens are now overgrown, and theweed-choked first tee sits in front of a rotting clubhouse whereconcrete shows through holes in navy blue paint.
"It's an absolute disgrace that a beautiful course like thathas turned into a mess," local resident Harry Gates told aReuters reporter on Thursday. "It doesn't look like anybody willbe swinging a club there again."
