Is this the biggest property slide ever?

Economics professor Kevin O’Rourke of Trinity College recently warned that Irish house prices could fall by as much as 70% from their Celtic Tiger peak. This would leave us with the dubious distinction of having experienced the largest property slide ever recorded in the Western world.

Or would it? If you thought our current property collapse was catastrophic, it’s in the half-penny place compared to the extraordinary boom and bust of Dublin’s see-sawing property market 200 years ago. For example, in the 1780s, a mansion in fashionable Merrion Square fetched 8,000 British pounds – the equivalent of €2.4m in today’s money.
But then it all went wrong. In 1800, the boom ended and the economy collapsed. In the glum years that followed, the same Merrion Square mansions plummeted in value to £2,500 (€750,000); by the time of the Famine 50 years later they were changing hands for £500 each (€150,000). Plus ca change, plus c’est la meme chose...
So what happened? The Georgian era was one of the most colourful periods in Irish history. It was then that Dublin first emerged as a bustling, modern metropolis. Designer shops lined the city’s fashionable new streets, and Venetian, French and Dutch artisans fetched up on our shores, hoping to make their fortune.
During the halcyon years between 1782 and 1800, Dublin became the biggest building site in the world, as a new and gracious city covering four square miles was built on what was once open farmland. Amazingly, the entire boom was largely funded by inheritances from widows, who, at the time, were prohibited from engaging in property ventures.
It was during this time that the world’s largest port, the Grand Canal Dock, was completed. It opened for business in 1796, as a thousand dignitaries from London, Paris and Berlin came to marvel at the spectacle.
The mammoth Grand and Royal Canals were also constructed, at a cost of £2.3m (€690m). Other projects included the re-location of Dublin city centre down-river from Christchurch.
Prior to this, the city was medieval and full of dank narrow laneways. Now it would have a new green field home, complete with four Georgian squares and an abundance of public buildings. The Custom House, which cost £200,000, was completed in 1791; Kings Inn in 1795; and City Hall in 1780.
The inspiration for the Georgian renaissance lay in personal rivalry between two developers: Luke Gardiner, who built Henrietta Street on the north side, and James Fitzgerald, the First Duke of Leinster, who built his mansion Leinster House on the then distinctly unfashionable south side of the river. On the completion of his House in 1745 he declared: “Wherever I go, fashion will follow me!” How right he proved to be.
Also part of the golden circle of property developers back then was William Connolly, Speaker of the Irish Parliament, who lived in Capel Street. He became the richest man in Ireland, trading on Catholic estates forfeited to the British crown. He ended up with 100,000 acres.
In 1722 he built Castletown House, Co Kildare, which had 365 windows – one for each day of the year. His nephew, MP and developer Thomas Connolly, inherited his fortune.
The incredible upturn in the fortunes of Dublin was all the more satisfying because it came on the back of a sustained period of poverty. In 1757, Dublin Corporation set up the Wide Streets Commission to plan out a new city. However, the country was on its knees due to punitive tariffs imposed by the British Government on Irish manufacturing. Insurrection was in the air, which the parliamentarian Henry Grattan skilfully used to twist England’s arm to grant the Irish Parliament full legislative independence.
Having already been driven out of America, the British Parliament – fearful of further trouble – granted full independence to the Irish Parliament in 1782. The effect was astonishing, as the 19th Century historian Seamus Mac Manus recorded.
During the succeeding years, this Anglo-Irish parliament – acting independently of the British parliament – was able to do wonderful things for the restoration of Ireland’s commerce and manufacturing industry.
As Brendan Twomey, of the Royal Society of Antiquaries of Ireland, explains: “Dublin was far bigger than any other English city. A huge network of Turnpike roads were built all over the country and you paid a halfpenny or penny at a toll house to go on the next stretch of road.”
Linen, brewing and milling were major industries, and Odlum’s Mills and the Guinness Brewery were both established in this era.
It was also a period when the great institutions were built, such as the Rotunda Lying-In Hospital, St Patrick Duns and Doctor Steevens’ Hospital.
The venerable institutions were respectively the world’s first purpose-built maternity, psychiatric and surgical and teaching hospitals.
“Up to that point, it was a Protestant city, but after the 1770s-1780s it gets a Catholic majority for the first time,” explains Brendan Twomey.
Although rich in trade, the speculative developers and builders required capital to turn their dreams into reality. And it came from the country’s widows, who on average outlived their husbands by two decades or more.
“There was no credit as we know it; the banks were basically only doing short-term loans. So to finance a project, wealthy widows were the source of money. Interest was fixed at 6%, and lawyers acted as the conduit to set up the deals,” explains Twomey.
The reason for the banks’ reticence was the collapse of Burton’s Bank in the 1730s and again in the 1750s.
“There was a speculative collapse and lots of people lost loads of money; it took 50 years to sort out the mess and four separate Acts of Parliament,” says Twomey.
Regardless, widows’ inheritance cartels and the Le Touch Bank provided a form of finance to propel the boom to ever dizzier heights.
The great developers had a penchant for naming streets after themselves. Luke Gardiner’s family had a virtual monopoly on the north side and developed from Dominick Street to Gardiner Street, onwards to Ballybough and down as far as the Liffey.
The Fitzwilliam estate, who were absentee landlords, were the principal developers on the south side.
Elsewhere, Henry Moore, the Earl of Drogheda, named four streets after himself: Henry Street, Moore Street, Earl Street and Drogheda Street, which was the old name for O’Connell Street.
However, the storm clouds were gathering: the notorious Act of Union in 1801 changed everything. Suddenly, the 300 MPs and those who sat in the House of Lords – and all their retainers – no longer needed to travel up to the Dublin Parliament, but rather to London. The foreign consuls closed and many of the fashionable boutiques went out of business.
The Le Touch Bank and widows’ consortiums bore the brunt of collapsing property prices, and many borrowers ended up in debtors’ prisons.
The canals were not as profitable as predicted and the turnpikes failed to generate much loot. As for the richest man of the age, Thomas Connolly MP lost all his money on foolish property ventures and went bankrupt in 1801.
In an attempt to raise money, he tried to sell Castletown House to the army as a barracks. They weren’t interested. Disillusioned, he contemplated leaving Ireland, only to die in 1803.
As for Luke Gardiner, he perished in the Battle of New Ross in 1798. He was succeeded by his son, but by then his fortune had largely dissipated.
As for the other great developers, they disappeared from history. “No one knows what became of them,” adds Brendan Twomey.