PVC King wrote:..........It is more a product of the bid rents that the market establishes. It costs not much different to build an identical house in Dublin, London or Cannes however the market bid rents are different. I do however agree that if construction costs fall some of it is likely to be passed on and more marginal projects become viable.
In Dublin you have a mortgage market based on three times salary, in London 4-5 times and in Cannes you have a product of imported bid rents from other markets.
...........The key steps are to stabalise the finance markets, secure and rebuild employment levels and remove stock overhang finally they need to rebuild the capacity to deliver a quality product and stable or rising prioce matrix so that a new market is willing to go to the finance markets and take on what is a very long term commitment.
If you concentrate on those 4 issues the construction sector can be restored to health in a 3-4 year period. If finance remains challenging or overhang persists it will take a lot longer.
I see what you are saying, BUT :
Rightly or wrongly, the average paddy does not give a damn about the present construction sector. To him it is synonymous with in-your-face builders/developers/estate agents and is glad to see them get their comeuppance. He wants, and believes that it will come, a construction industry that provides a quality product at a fair price. That is why Paddy is not buying.
I disagree on your pricing comment. A few years ago I rebuilt a house in Kerry for not much more than double what I was being quoted for a two-car garage in Dublin. The garage is still unbuilt. Bad example, Cannes, it is for Russian oligarchs and bling Paddies but still cheap by Irish standards. Instead, look at what is happening in Nice and the cost of property there. Far cheaper than Ireland, despite good demand, a university, a port, an international airport, a tramway and superb rail connections, all in a world-renowned tourist location. Alongside, in more expensive Cap Ferrat/Villefranche, so much of the property is owned by Irish that they drove up the price, which now is falling due to their departure. Strange to think that Paddy had a big influence on property prices in the Cote dâ€™Azur.
Bid rent formulae and methodology are fine when you can quantify leisure time, commuting time and income. However, big question marks hang over most of the inputs because nobody knows how secure their employment is, and what their income (if any) or commute (if any) will be six months hence. As a result, both leisure time and consumption are either big unknowns or variables, so in todayâ€™s Ireland that formula is out the window.
I agree with the need to sort out financing, property overhang and general expenditure. This recession is a marvellous opportunity to get this country on the right track. It is specious to say â€œout to get the buildersâ€ â€“ finally, people are getting the message, we were off the rails and the product being offered by builders was (a) crap and (b) vastly overpriced. That is why it will not sell and why no-one will buy. The 20-somethings that did not buy have had the crap scared out of them, seeing their friends in negative equity. It will need a bigger drop and a longer time before new buyers appear. Let the builders close down. They were inefficient. Use the best to complete semi-finished projects in viable areas. Use them for start-up offices for anyone from the dole. Free rent for a year. That will help the overhang.
We do not have the money to pay our present Public Service, or pay outlandish amounts to product/service providers. Builders also fall into that category. Why do we need 20-odd VEC committees AND a Dept. of Education? We have dozens of quangos, local authorities, e.g. we have a South East Regional Authority and a Southern and Eastern Regional Assembly. What do they really do that is different? (Actually, what do they do?) Merge, with staff cuts, or close them down where appropriate. If they do not like it, and go on strike, let them, lock them out and then we do what Reagan did to the air traffic controllers. Lots of people out there better qualified and looking for jobs.
What are the planners doing now that there is no development? Could they not be put to work on a proper, cohesive NATIONAL plan? Anyone want to ask a hard question about the windfarms that are an eyesore on a growing number of mountain tops? We need politicians with vision, who will take tough decisions, communicate and LEAD. We have a government that mumbles/bumbles/waddles along like a fat duck and an opposition that is no better. That is what scares me and keeps me negative on the the length of time we will have to endure this mess.
Sorrry for another long post, but to paraphrase Oscar W. I did not have time to write a short one.