No. Those land banks were the equivalent of ‘raw material in stock’, the basis for production next month/year/whenever.
I mean, if the above was true, then look at middle tier property developers in Ireland. The middle tier development area is where the real skills are to be found surprisingly enough. The reason being, that many of those guys had quite successful and lengthy careers as professionals and consultants before they got into the property game late.Bucket of Nails
The guys who started with the bucket of nails and a tin of paint made it to the first division yes. But they hadn't an opportunity to learn and improve their minds, while fighting their way up through the leagues.
To the best of my knowledge the middle tier developers didn't make the same monstrous mistakes either with regard to land. In fact, they operated on a different model whereby they disposed of land with planning permission attached for quite extensive developments. That is how they made their cut. Rather than wading in the whole way and ending up with unsold houses.
You could say they were like Japanese car makers, they needed less raw material and operated on smaller lots. Or even more accurate, they were like Nike who designed the runner shoe and got it made somewhere else.Irish Towns
Of course, rarely were the schemes they gained permission for ever realized. There are thousands of them. You can check in the planning departments if you like. The Irish construction industry was getting efficient by 2006 certainly. But it wasn't good enough to munch its way through a fraction of what was granted permission.
That was part of the point that Paul Keogh made remember in his essay about sustainable land development. That zoning in many Irish towns is much larger than what the tiny population could support.
It might be of interest to know that the architectural profession operates on a similar model. The successful architectural practices are successful and profitable because they never build anything. They get paid to come up with designs. They would rather they took something to planning stage and never heard or saw it again.
That is how the middle tier property developers made their turnover. They never laid a single brick often.Making Masterplans
A lot of first division developers had 'access' to thousands of acres of land. But had not even got a developed stage masterplan for one tenth of it. Architects cost money. On the other hand, the middle tier developers had maybe 100 acres on the edge of a town somewhere, and a fully developed masterplan up to full planning permission grant approval stage.
But their plan wasn't to hold onto the land for long. Only long enough, to sell to someone else with PP.
You see the difference? Different skills entirely. I would like to maintain the 'classical economics' position that land is a 'raw material in stock'? I really wish it were so simple.Owning IP
Intellectual property for instance is the best kind of property to own. You can sell it as many times as you like but you never give it away. (Within a 25 year period at least, but large media companies want to own Mickey Mouse and Donald Duck for ever)
You see a lot of fabless silicon chip companies today. Intel are one of the few left in the business who own and run their own fabs, while still designing the chips. But that model is getting tired also.Classical Economics View
Sure land was a raw material in the neat theoretic sense of it. But the trick was to try and build on it in such a way that one did not sell the land, but earned as much rent as one possibly could with as little tenant administration or servicing as one possibly could.
Get the local authority to build and take charge, free of charge, as much of the basic civil infrastructure as one could. The developers didn't want to build any roads. That is the only reason why local authorities were even tolerated and allowed to become joint venture partners. The local authorities thought it was to do with their 'having a say'. Some hope.Let the rabbits live on it
In a lot of cases, it was easier if you could hold out and not build on or touch the land at all. You will see the local authority kept their end of the bargain by laying the road and infrastructure. That is about it.
Building on the land and selling solved a minor cashflow problem today. But it didn't solve anything tomorrow. Whereas holding onto the land and allowing lenders to take a charge against it, left you with a lot more options in the medium term. Even if you ended up losing the entire landbank eventually.
In the meantime, by not developing it, it was helping to keep you solvent. It bought you precious time, which struggling Irish builders badly needed towards the end of the Celtic Tiger.
Every 10 years or so the staff in the local authority would roll over and a new fad would emerge. Something like the 'low carbon city', so that planning directors could go to conferences and make a speech about some great new idea.
Still the land bank sat there and rabbits thrived in the weeds and long grass. Pheasant shooting was available in the more wooded areas and un-claimed horse populations roamed the plains. Architects went on making sketches to visualise even more ambitious plans in full pixel perfect photo representations.Land Taxation
Land tax would put a stop to builders doing that. We could use profit from developing central and strategic land banks in order to offset the losses in the NAMA portfolio in locations where use reverts to agricultural. I would disagree. I believe we should take the hit up front where it reverts to agricultural values.
But then use the profits which NAMA can generate in order to 'buy out' any joint venture partners, legal deed interests or other charges against 'abused' land banks that are in the prime and sustainable development locations.
You would have to work with developers on a daily basis for a number of years to know how capable they are of ruining a perfectly good asset with all kinds of messing.
But in some cases unfortunately, like a true Ponzi scheme of things, the scandalous complexity of ownership and legal rights associated with our land banks may have began with the third last previous 'owner' of the lands.
But heck, you know we can agree to disagree on this little item. It can only make it more interesting. I think we are working towards a common understanding on most other fronts.
We had a property bubble. It cracked and in the scale of things it could have been repaired, with some pain. This was the expected so-called “soft landing.” However, the crack coincided with turmoil in money markets caused by the CDOs scandal in the US. That dried up liquidity. Then the world learned about the shenanigans at Anglo, Nationwide, ILP, etc., and very lax (or absence of?) Regulatory control. This was not long after the stink internationally over what happened in the IFSC on Parmalat and the German Landesbanks, so Ireland was not a place anyone could recommend lending into, thus Irish banks could not get cash and the taxpayer had to put its head on the block.
I like the way you layed out the sequence of things very correctly there. It is indeed interesting when you see it like that.
Brian O' Hanlon