The Question of Land

The Question of Land

Postby garethace » Thu Jun 25, 2009 10:56 pm

Agreed. I suggest we should use this recession as an opportunity to introduce some positive aspects into current planning weaknesses. Now that the tent is gone and the builders broke, changes should have a better chance of success.


Kerry Bog posted here:

http://www.archiseek.com/content/showthread.php?t=7663&page=2

Something came into my mind later today. I wanted to offer some opinion about what I call the 'common public understanding of land'. The common public understanding of land is quite problematic in my view. The common public understanding of land now, is that land is worth nothing. I hear this view from a lot of Irish people now. It is like they are delighted that land has lost its value, so that the mean old nasty builders can get caught out. But at what expense in the longer scheme of things? Frank McDonald made an observation in his recent book, The Builders, that Irish banks refused in the recession times of the 1970s in Ireland to take land off builders hands in lieu of loan payments. The banks apparently didn't think land was worth anything in the 1970s either. Of course, what happens when the banking and financial institutions do not buy up land in hard times, is that land sits there idle. It can seem to anyone with any common sense, that indeed, land is worth nothing.

But of course, land sitting there in that kind of state is a very dangerous thing indeed. It is like the dry ground material that accumulates before a forest fire. If it is not valued in any way, the door is left wide open for a small few opportunistic 'developers' to move in and acquire it all. The results of what happens then, is clear for all to see in Ireland. You get another rush of craziness, and suddenly, everyone thinks that land is the new way to make a fortune. This cycle keeps on repeating itself in Ireland. I have read a lot of George Soros books, Alan Greenspan, Paul Krugman etc. Theories about economics usually have to include the human factor. What humans in their minds believe in some way, can alter reality. The net result of this wide public perception of land in Ireland, is that we have to endure very hard ups and downs. The common public understanding of land in Ireland still, is that in order to 'extract' any of the wealth inherent in land, one must go through this difficult boom and bust cycle.

You will probably find that perception throughout the world, but in Ireland it appears a lot more acute than elsewhere. That human perception of land, leaves the whole system vulnerable to 'financial manipulative gaming' in all sorts of ways by a few private individuals. It is funny, we have had the Anglo Irish bank scandal in Ireland. But I wonder if this recession will be any different to any others in Ireland. Will we manage to break this old cycle? This old demon that seems to keeping coming back to haunt us? The right place to start, is to ask that Irish person today, why does he/she think that land is worth nothing? Apart from the sense of satisfaction of knowing that the builders are now broke. Why shouldn't banks accept it in exchange for loan relief? What keeps a stability in the system in the UK, from my knowledge, is the fact that insurance companies and pension funds do invest in property as the yield improves during recession times. This has the effect of buoying up the market again and gradually as the yield decrease, the pension fund or insurance company will sell their property portfolio in order to put their money elsewhere. This does not appear to happen in Ireland. Instead we have a dangerous and destructive wrecking ball that keeps swinging back and forth, eventually getting everyone.

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Re: The Question of Land

Postby missarchi » Fri Jun 26, 2009 12:10 am

garethace wrote:Instead we have a dangerous and destructive wrecking ball that keeps swinging back and forth, eventually getting everyone. Brian O' Hanlon


It never gets everyone... We have a dangerous and destructive system because its the only way people can make money otherwise you have to buy and sell in the same market unless your a bank. Exchange rates used to be fixed now variable is standard...Everyone wanted to go high now everyone wants to go underground.

hush hush... nothing will change its institutional :P
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Re: The Question of Land

Postby KerryBog2 » Fri Jun 26, 2009 4:56 pm

garethace wrote: The common public understanding of land now, is that land is worth nothing. I hear this view from a lot of Irish people now.


I disagree. Land and its ownership is probably one of the most emotive subjects in Irish society. Think of “The Field”, Cromwellian dispossession, Penal Laws, Repeal Acts, Wyndham Acts, etc, right up to the Land Commission of the 1950’s. The Irish love land and always put a high value on it, which is why only a single-digit percentage of the Irish land bank changes hands every year. That is why Irish agricultural land prices in early 2008 averaged £15,357 compared to £4,316 an acre in the UK. (€/£ at Q1 2008 rates) Consider those values in the context of population size & wealth stats and the difference is even more outlandish. Much of the Irish land cost was due to lifestyle farming, selling up in D4/Dalkey and buying a big house in the country with a good few acres.

garethace wrote: It is like they are delighted that land has lost its value, so that the mean old nasty builders can get caught out.


Correct. What Joe Public thinks is “It serves them right.” Yes, we still like the bit of begrudgery, particularly when for several years we have had our noses rubbed in the mud by developers who buzzed us in their helicopters, outdid us at everything, from bling houses and cars to parties for their 16 year-olds and got into mingent competitions over €30k turf buckets.

garethace wrote:..........that Irish banks refused in the recession times of the 1970s in Ireland to take land off builders hands in lieu of loan payments.


In the mid 1970s I worked in banking, my first real job. Back then, a banker was someone who lent money and got it back. That definition seems to be outdated today, but the job is the same, not to build or develop land banks.

garethace wrote: What keeps a stability in the system in the UK, from my knowledge, is the fact that insurance companies and pension funds do invest in property as the yield improves during recession times


Yes, they do invest but get a rate of return commensurate with their investment, a return possible only because of realistic investment values. In the mid '80s the UK departed from that and learned the lesson, unlike many in Ireland.

garethace wrote: But I wonder if this recession will be any different to any others in Ireland.


Yes it will. It will be longer, it will be deeper and it still has a long way to go. Hopefully, when we start to come out of it, we will have learned some lessons. Hopefully we will have a Regulator that regulates, Regulatory & Dept. of Finance staff that understand economics, a lending policy that is based on reality and boards of directors that are knowledgeable and do their duty. A heavy dose of commercial morality would help. Hopefully the ODCE will do its stuff and those who merit it will be disbarred and / or behind bars. That would be a start.

garethace wrote:...we have a dangerous and destructive wrecking ball that keeps swinging back and forth, eventually getting everyone.


The wrecking ball will continue to swing until NAMA is up and running. Then, and only then, can the extent of the destruction be quantified.
Don’t hold your breath.
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Re: The Question of Land

Postby garethace » Fri Jun 26, 2009 5:46 pm

The Irish love land and always put a high value on it . . .


I once heard a story about a developer I know. He was putting together a site to do a development. So one morning during the breakfast he invited a couple of his 'hard hats' into the nearby shop to get bread rolls. He told his colleagues, pick out what you want and I'll pay for it. So they did. Then he said to the shop keeper, I will have these bread rolls and also, I want to buy your shop. That is what you call cutting to the chase. You have to admire the efficiency of it. By the way, the shop keeper never sold out, and the developer got interested in another project.

I think the Irish relationship with land is slightly perverse. Like the proud father holding onto his beautiful daughter too long. I guess we were so poverty stricken and beaten down in Ireland for so long, we are affected by it. The beautiful daughter is too good for any of the locals to possess. In this case, the daughter is land, and land cannot stand up and fight for itself. But it does have a way of biting us in the ass all the same.

I have listened to accounts of people in Leitrim who do not want their land to end up in their neighbours hands when they are gone. The ideal would be for an outsider to come in and buy it. But there is still a chance the neighbour might rent the use of the land from the outsider. The ideal solution for a Leitrim land owner, who is thinking in terms of the future, is for an outsider to buy their land and put it into forestry. Thereby ensuring for future generations that none of the neighbours will not get their paws on it. It was an old man from Leitrim who told me that, but it is probably a familiar pattern all over the country.

That is why I admired the man with buying the bread rolls.

. . . which is why only a single-digit percentage of the Irish land bank changes hands every year.


Can you see a problem with that?

Land is often subject to an increase in value because of infrastructural building that the landowner doesn't contribute a farthing to. Someone who owns a house beside a LUAS line, benefits from a large increase to the value of the land on which their dwelling sits. But has to contribute nothing to the public good in return. That is on the individual dwelling scale. You can scale it from there, and achieve trully massive gains if you know what you are doing.

There is no incentive to sell on the land and make it available for better uses. This drives up the cost of everything abnormally in this country, and we all end up paying the price. In the paper the other day, I looked at a headline: The IMF says that Ireland needs to introduce a 'Property' tax.

No, no, no, no . . . . No o o o O !

If we tax the property we are missing the entire point.

The property only sits on the land. What we need to do is encourage the right kind of property, on the right kind of land. Introducing a 'property' tax will only prevent us achieving that. If you tear down the roof on something, it is no longer considered property and becomes derelict potential building land. Introducing a taxation on the land on which the property sits is what is really required, to re-distribute the correct building functions to the correct land locations. But trust the IMF to get it totally cock-eyed there.

Bull, Balchin and Kieve's book on Urban Land Economics make a similar point about retail space in the UK. The UK is over supplied with retail space. But it is the wrong kind in the wrong place. Paul Keogh made this point in relation to residential here:

http://www.developer.ie/wp-content/uploads/2009/06/paul-keogh-essay-on-sustainable-development.pdf

This is one of the first and most important corner stones of sustainable land development. Which I tried to develop a simple and use-able model for here:

http://designcomment.blogspot.com/2009/06/multi-layered-definition-of.html

The property developers are very busy people, even today. Not many people imagine that, but they are. They certainly need a good robust model for assessing the sustainability dimensions of future development. To date, that hasn't really been forthcoming from any quarter that I know of. Planners normally want to get developers messing around with reed beds and rubbish like that. But cannot see the bigger picture.

That is why Irish agricultural land prices in early 2008 averaged £15,357 compared to £4,316 an acre in the UK.


That is an interesting statistic. I didn't know that.

Consider those values in the context of population size & wealth stats and the difference is even more outlandish.


I read recently in the Energy Saving Trust UK publication on light bulbs and energy efficiency, that about 800,000 homes in the UK per year undergo extensive electrical re-wiring every year. (I think that was based on a 40 year cycle for electric re-wiring of houses) Now imagine that. That puts some kind of measure on the scale of the market in the UK compared with Ireland. Ireland has a total housing stock (including all the newly built apartments) of around 1.4 million units. So, you can imagine the dwelling retrofit industry in the UK would go through the entire building stock in Ireland every two years.


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Re: The Question of Land

Postby PVC King » Fri Jun 26, 2009 7:15 pm

missarchi wrote:It never gets everyone... We have a dangerous and destructive system because its the only way people can make money otherwise you have to buy and sell in the same market unless your a bank. Exchange rates used to be fixed now variable is standard...Everyone wanted to go high now everyone wants to go underground.

hush hush... nothing will change its institutional :P


Do you ever read what you write before posting?

Everything has changed because institutions got it so badly wrong that they were able to buy their own debt back at 30c in the €1 such was the lack of faith in the loan books of various banks whilst the government remains dazzled in the headlights of unviable underground and other ways to increase the burden of debt on the poor private sector taxpayer who unfortunately is reliant on the global economy for job security.

Land is driven by the location economics of the bid rents that those charged with managing the factors of production decide they are worth combined with how regulators decide various uses are regulated through numerous regulations relating to environmental, employment, wealth creation, political and social order considerations.

I have no doubt that one day in the not to distant future we will find a thread titled the meaning of life on this forum

You are all design professionals go off and find some niches in the market where there is a suitable demand for developments that hit what the market wanted in the last phase but couldn't access; the cycle will turn; allowing 20% of planning permissions last quarter to be one off houses in the context of 250,000 un sold housing units and banks with development land loans in serious distress is absolutely unbelievable. There must be an immediate ban on all one off housing permissions unless the applicants are bona fide farmers or carers looking after ex farmers or dependents of ex farmers and such permissions must be accompanied by a ten year occupany clause.

Sort out the development land negative equity and you solve the economy, and fire Dick Roche for creating the conditions for the Anglo Irish small plot development loan book creating site farmers and an army of developers who gained a small amount of equity to borrow heavily leveraged sums they were uncapable of meeting with their own resources.
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Re: The Question of Land

Postby garethace » Sat Jun 27, 2009 12:35 pm

PVC King, thanks for that.

I hadn't thought to make your point of a moratorium (A suspension of an ongoing or planned activity) on once off dwellings. That makes a lot of sense. Your suggestion to look at other areas of the market that might require service also makes sense.

You are all design professionals go off and find some niches in the market where there is a suitable demand for developments that hit what the market wanted in the last phase but couldn't access; the cycle will turn;

. . . fire Dick Roche for creating the conditions for the Anglo Irish small plot development loan book creating site farmers and an army of developers who gained a small amount of equity to borrow heavily leveraged sums they were uncapable of meeting with their own resources.


I would like to develop upon that if I may.

I knew and worked for individuals during much of the Celtic Tiger years, who had developed quite sensible niches for themselves in the market and were quite expert at working within those nices. But my experience was as follows. The same people who enjoyed a sustainable business model, were constantly looking at what was happening around them. They saw all of these site farmers and small plot developers, who clearly had not got the same skill or experience. But were making orders of magnitude more profit, than the guy who had carved out a sustainable niche, and developed a good business process over many years.

You can guess the rest. The younger construction professionals who were looking to score a better pay check, got very abusive to the senior level construction professionals. Relationships deteriorated to a point to which they couldn't be fixed. What are we doing standing here on the sidelines? Why not get on the Celtic Tiger team for the big win! Fianna Fail were almost proclaiming as much on their election posters. The logic was quite simple. Gee! If these wingnuts without any expertise can make a killing out there, then really s*** hot professionals like ourselves should do double the money.

So what happened towards the end of the Celtic Tiger in my experience, was a lot of sustainable small construction professional practices were dismantled and re-invented as boom-friendly organisations. Of course, that meant they went out and extended the company credit limit as much as possible. (Often buying up other small construction professional practices to hyper-boost the creation of a larger one) The banks were more than willing to fund these adventures. The banks biggest worry, was that another institution might jump in and grab the business instead. Banks were fighting defensive wars against one another, which didn't allow them time to evaluate the big picture. The banks facilitated and encouraged the dis-mantle-ment of a lot of good, strong, sustainable business practices in order to give away more credit.

Of course, having broken up the older, less profitable business unit, these guys who re-organised their business to harvest more of the Celtic Tiger profits found themselves hung out to dry when it all collapsed in on them. But you can see why it happened. You can see the continued strain the senior construction professionals were under. Each year that went by, their older and more sustainble 'niche' business model appeared to look more pathetic beside the newer, faster and richer fly-by-nights.

It was difficult for senior construction professionals to keep less senior professionals contented. By not giving them large Celtic Tiger sized bonuses each year. (Of course, the less senior professionals wanted to buy houses, and needed those bonuses to sink into property for themselves. After all, what is the point in being a professional, if you cannot even afford your own house?) In many cases what happened was the directors were chucked out altogether and the young turks took over the castle so to speak. This was viewed as 'progress'. It was viewed as sweeping out old ideas and in with the new. But the young turks were ultimately left with an over-leveraged castle and no Celtic Tiger to support it! Those castles are now up for letting.

I think this has really added to the avalanche of redundancies we have seen, and will continue to see. The only way for construction professionals to make hay while the sun shined on the Celtic tiger, was to develop huge combine harvester grade design teams, that could cut through acres and acres of work available in the larger jobs. The standard of team work and design services generally within those large teams was rubbish! (So people who have worked during the Celtic Tiger have not developed the best of habits often) It was a strange time the Celtic Tiger. The larger your design team and the worse the quality of its output, the more profit you stood to gain. Things were turned on their head, normal logic didn't apply. That size that was so advantageous in the Celtic Tiger years has now become poison to a lot of businesses out there.

Lastly, I would like to include the following comment. A lot of construction professionals from abroad were encouraged to come to Ireland during the Celtic Tiger, as the requirement for more employees was acute. Often someone who arrived from a distant part of the EU zone, could be hooked up with a job in Ireland before the day was out. I remember at one stage, while working for a small 25-year old niche business, we had to purchase in labour for a job we had. Of course, we went out onto the job market and found we had to compete at Celtic Tiger sort of rates.

In return for paying a huge salary you often got someone who had very little English, was only fresh out of university and had no real clue about working in the real world. Even when you paid the Celtic Tiger going rates, the new employee still managed to complain that wasn't enough. There was a better deal going down the road and would you match it? Many new arrivals did not feel too committed to a company. You could not attempt to offer training or their faces would pucker up, and they would threaten to leave you.

I need not tell you the impact it had on existing small business. When you realized that the new guy over in the corner with the broken English, was making double the amount that existing long time employees made. It was a horrible situation for small businesses to be in. On the one hand they were forced to purchase labour like this. But inevitably what happened, was for every new arrival you employed, one of your existing employees would lose their temper, quit working for you and decide to take the job down the road. When that happened, 10 years of knowledge capital would walk out the door, and you were left with a bunch of misfits. Of course now, everyone is now on their backside, and none of this matters any more.

The Celtic Tiger years didn't offer a sensible approach towards the integration of good foreign expertise with existing Irish teams. I am not pleased about that myself. Because we had an opportunity to avail of the best ideas from around the world. To use those ideas to help us to build a country worth living in. The above explains why we need to be careful about the 'Land Issue' in Ireland. Learning how to understand land and its problems in Ireland is going to faciltate a much brighter future for Ireland. What more can I say?


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Re: The Question of Land

Postby garethace » Sat Jun 27, 2009 4:16 pm

The above piece falls quite neatly into the third stage of my sustainable model described here:

http://designcomment.blogspot.com/2009/06/multi-layered-definition-of.html

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Re: The Question of Land

Postby missarchi » Sat Jun 27, 2009 10:35 pm

I think you get the main points about the industry but it could look more at the following questions...

Why in the past was in possible to buy a house on one income?
Why do you pay 800,000 for a 400,000 loan over 35 years should loans be capped at 5 years for all business's people and government?
Fixed acre rates...
Inflation/interest rates/salaries/cost of living/elect/rent...
Why an low range architect/tech cannot afford to buy a house and own it during a boom...
Why people that came here could never afford to buy and survive a boom bust cycle...
PG's parental gift's

But none of that will ever happen because its a global system.

I'm glad I never listened to the banks and the people;)
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Re: The Question of Land

Postby PVC King » Sun Jun 28, 2009 11:23 am

garethace wrote:The above piece falls quite neatly into the third stage of my sustainable model described here:

http://designcomment.blogspot.com/2009/06/multi-layered-definition-of.html

B.



I would go along with a four stage analysis in terms of the way projects have been delivered to date i.e. in the context of a well funded process from start to finish with the possible exception of stage 4 which has seen a very mixed implementation depending on whether the firm charged with taking on the responsibility regarded reputation or profit as the driver. I would further say that the four stage approach of

1. Concept / site identification
2. Funding / quantum scoping
3. Unit configuration / delivery
4. Post disposal management / tenant (or management company shareholders)

is now redundant as construction has suffered from catasthrophic market failure and that a fifth layer of national market restructuring or reordering needs to be created.

Todays sindo lists two facts which are interlinked firstly government capital spend has declined from €5bn planned to c€500m if Tommy Pearlean is to be believed, secondly total construction industry (taking the widest possible measure including RIAI, SCS etc) employment has fallen from 400,000 at peak to 200,000 current and potential collapse to 100,000 at some stage in 2010 when the floor is reached.

It is easy to point the finger as 69% of Sindo readers did today at Brian Cowan or cheerleaders such as Tommy Pearlean a career lobbiest or Dick Roche a clearly populist politician who never had any strategic vision on anything other than re-election. What does that acheive for 200,000 unemployed construction workers?

What is clearly required is a fifth stage of analysis that will over a 5 year period restore employment in the construction sector to say 250,000 - 300,000 people and retrain or resettle to additional 100,000 - 150,000 workers to new sectors or countries. The failure to tackle this issue will result in structural unemployment of 200,000 to 300,000 people which comes on top of another 200,000 displaced by the global economy or poor life chances that saw them miss out on the spoils of the Celtic Tiger.

The major positives I can see on the horizon is that

1. Capital spending has been slashed i.e. capacity to borrow is not being spent on priorities relevant to a previous point of the cycle. News of this is bound to improve sentiment towards the fiscal position.

2. Manufacturing is holding up and when global corporate profitability returns to normal investment levels will increase benefiting Ireland disproportionately as per the past 20 years per capita.

3. Deflation - prices are starting to move in the right direction, further weakening iof the euro would also help greatly.


What clearly needs to happen next is that at least until the industry is restored to health that a clear shift away from developments happening because a development opportunity arose they need to happen because the projects in question deliver on the basis of a manditory set of criteria.

It is not just Ireland that has had these problems and looking at elements of the Obama stimulus plan of which very little has been implemented to date other than TARP there is a clear acknowledgement that the construction industry relationship has altered from the government consuming the scraps that the private sector didn't want to moving centre stage in the recovery. It is notable that the stimulus package is targeted at delivering other objectives beyond and directly contrasting with an objective to simply refloat the status quo of the previous 24 years of almost uninterupted boom from 1983 - 2007.

Recovery to 2005 levels is certainly acheivable but it needs to be based on a vision containing a set of core principals which need to be agreed by the social partners to ensure that industrial unrest is absent as was the case from 1987 - 1997 i.e. the phase when high growth and low inflation were present in all but 2 years.

The principals it is felt that should underpin this process are

1. The construction industry is a key generator of wealth and should form at least 7% of GDP over a five year cycle but not exceed 20% in any given year.

2. Ireland is not a net energy exporter therefore sustainability is vital in all new build and all existing buildings with a perceived future life cycle of 25 years plus

3. Certain infrastructural investments have the potential to disproportionately deliver connectivity and reduce carbon footprint.

4. Average medium term housing demand is say 50,000 - 65,000 units per annum based on a young population structure ( revised Bacon analysis required)

5. Office demand is say 500,000 sq m p.a. (wild guess), Logisitics / light industrial demand is say 500,000

6. Retail should be tilted towards tourist led demand given the oversupply of hotels, with City & Town centre development being prioritised; user clauses of out of town retail should exclude all uses except bulky goods and one or two catering pods.

7. Construction employment will never hit 400,000 again as this level is unsutainable, re-training to new careers (to say special needs assistants) or relocation assistance should be provided to at least 100,000 people

8. Dole should be reduced from the €198 per week, Irish social welfare is the most generous in europe and a good trait of the psyche that when their was largesse the weakest were given a good standard of living; an immediate cut to €145. Training allowances and social jobs such as care assistants should be pitched at no less than €225 per week to provide a real incentive to remove what has the potential to become structural unemployment.

9. Completed Residential units in delinquent schemes held by NAMA should be transfered to a holding company to be rented out atr current market rates and not left on the market or sold at fire sale prices. The income potentially paid by the government in many cases would pay the commercial mortgages and as a result remove the deliquant status from the loan, that in turn improves the NAMA profile, reduces negative perception of government debt lowering finance costs and removes supply overhang.

10. Retro-fitting environmental features into the OPW estate, this would over a 10 year cycle be cost neutral, presuming the buildings have a life span of at least 25 years unexpired is clearly justifiable.

11.Introducing tax incentives for sustainable development projects, at a meeting with the IDA a number of years ago the IDA side were very clear that their professional services client base wanted more sustainable buildings but that construction industry were more focussed on profit. A scheme similar to the urban renewal schemes centred on rail hubs and QBCs should be implemented featuring business rates holidays, reduced stamp duty etc.

12. Construction costs have fallen dramatically as have finance costs both need to be carefully controlled by limiting development consents going forward to ensure that provision of space remains competitive.

It is clear that the massacre predicted for manufacturing has not happened, financial markets are recovering and there is the potential to correct the perception of rip off Ireland in the European Tourist market. Further positives are that the infrastructural deficit and above average household size still persist both of which will uinderpin demand.

The over-reliance on construction is the major problem at present but a clear plan needs to be established based upon a shift from site opportunity led development to a system governed by tax breaks on sustainability and competitiveness criteria.

A first start would be reverse the travel levy, using the funds garnered to date to establish festivals (why not have 15 concerts a year at Slane Castle, another 10 at Thomond and another 10 a Croker) that will fill all those empty hotel rooms and get retailers tills ringing again. As one property industry contact said this week we need to combine environmentalism with a TK Maxx approach to get people into the terminals and spending to pay for those principals. How we get them to the hotel needs to be on a shoe string for now i.e. allow taxi's to use the port tunnel free and use the former truck lanes on the Liffey Quays to become a QBC/QTC. The days of thinking in billions are gone for now, you need to think in re-regulation and delivering stimulus not as dole but in making core industries more efficient; it is time for the rabbits to put on welding goggles and get on with creating the future.
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Re: The Question of Land

Postby johnglas » Sun Jun 28, 2009 11:38 am

It is clear that the massacre predicted for manufacturing has not happened, financial markets are recovering and there is the potential to correct the perception of rip off Ireland in the European Tourist market. Further positives are that the infrastructural deficit and above average household size still persist both of which will uinderpin demand.


PVC: good on you; even if not all your suggestions are unarguable (two commentators, three opinions), you have at least set out a 'sustainable' (to use that over-worked word) vision. That's what politicians just 'don't get'. In Ireland you urgently need a national conversation just to agree such a strategy and then a general election to clear the air and get implementation going (if you elect FF again, then you deserve all you'll get, just like us re-electing New Labour). And the banks need to be told that you effectively own them and that lending needs to be available and targeted.
Anyway, this is an excellent start and perhaps suggest a new thread devoted to this entirely?
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Re: The Question of Land

Postby PVC King » Sun Jun 28, 2009 4:27 pm

Thanks John

I have a feeling we will never agree on macro economic policy but that it is clearly time to stop the blame game and estabvlish a clear development policy going forward. No developed economy can function without a healthy construction sector but equally no construction sector can deliver secure employment if the underlying development strategies are not sustainable.
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Re: The Question of Land

Postby garethace » Sun Jun 28, 2009 11:17 pm

I have a feeling we will never agree on macro economic policy but that it is clearly time to stop the blame game and estabvlish a clear development policy going forward. No developed economy can function without a healthy construction sector but equally no construction sector can deliver secure employment if the underlying development strategies are not sustainable.


Couldn't have said it any better myself. You know, I have noticed a good deal of personal break time over the last week, end up being spent running my mouth off at Archiseek. I was hoping to enjoy a proper break, where I read more and talk a lot less. I find that way I learn more too. But it has been really nice I must say, to read some of the stuff posted here, obviously written by more intelligent people than I am.

It is notable that the stimulus package is targeted at delivering other objectives beyond and directly contrasting with an objective to simply refloat the status quo of the previous 24 years of almost uninterupted boom from 1983 - 2007.


Yeah, the thing that floats my boat most about the new concepts of sustainability (or perhaps they aren't so new as we like to think, but rather re-adjusting our outlook a bit better) is that it offers people working in all areas, both public and private an opportunity to jolt out of a way of thinking that has lasted and developed over most of my lifetime. Being born in 1974, I was only just coming to an age of consciousness when all of the things in the 1983-2007 timeframe played out. What I mean is that I have grown up with certainly things in the world seeming normal to me. In order to perceive a different option, I need a strong and robust model in order to guide me. I think that is probably true of many in my generation.

Recovery to 2005 levels is certainly acheivable but it needs to be based on a vision containing a set of core principals which need to be agreed by the social partners to ensure that industrial unrest is absent as was the case from 1987 - 1997 i.e. the phase when high growth and low inflation were present in all but 2 years.


Another very interesting point. I believe the professionals need to fall in behind whatever agreement in necessary too. To be honest, I was shocked at easily people in the professions took to the real free market, dog-eat-dog mentality that really came out in Ireland towards the end of the last cycle. I wouldn't have predicted that at all. Living on this little island for most of my life, I imagined we were somehow better or more immune, or pure or something. There was an interesting documentary about Madoff on BBC. It is interesting the way in which the God complex takes over in the end. One can get a self-believe that one is invincible. That is very sad to watch in people, especially talented people one knows and respects.

3. Certain infrastructural investments have the potential to disproportionately deliver connectivity and reduce carbon footprint.

4. Average medium term housing demand is say 50,000 - 65,000 units per annum based on a young population structure ( revised Bacon analysis required)

5. Office demand is say 500,000 sq m p.a. (wild guess), Logisitics / light industrial demand is say 500,000


I have to say, I do agree with the above. I am also glad that people such as Paul Keogh and indeed quite a number of others seem to be keyed into the 'big concept'. And are interesting in making a plan that could work and deliver back acceptable economic conditions and prospects in Ireland. I also agree with the notion, that many other parts of the world do need to rise to a similar kind of challenge.

I have written elsewhere at Archiseek, about the need to be careful in the legislation that we introduce. Whatever road we go down with legislation, must ensure that the Paul Keogh's of this world remain part of the re-building process. What I saw from the inside during the Celtic Tiger years, was an almost systematic attempt to exclude good ideas from the process. On the one hand we felt good about ourselves when we produced so many professionals and graduates. But then when it came to the hurdle of involving them in the process, all kinds of excuses were found to explain why we shouldn't include them. This resulted in massive ill-feelings with
in the professions themselves.


6. Retail should be tilted towards tourist led demand given the oversupply of hotels, with City & Town centre development being prioritised; user clauses of out of town retail should exclude all uses except bulky goods and one or two catering pods.


Quite an interesting suggestion. At a recent brainstorming session of industry people mainly, the idea was developed to build healthcare facilities which could become 'best of breed' on the world stage. That providing of healthcare in Ireland could be expanded beyond catering for people within the island alone. I suppose, given the fact that it is now an open and large European region it makes a lot of sense. Who knows, maybe the market goes beyond the Europe region. I thought it was an interesting idea, and could quite neatly dovetail with what you mention in relation to retail strategy.

9. Completed Residential units in delinquent schemes held by NAMA should be transfered to a holding company to be rented out atr current market rates and not left on the market or sold at fire sale prices. The income potentially paid by the government in many cases would pay the commercial mortgages and as a result remove the deliquant status from the loan, that in turn improves the NAMA profile, reduces negative perception of government debt lowering finance costs and removes supply overhang.


I would have to add to that, we have the opportunity in Ireland now to evaluate other rental models for building sustainable residential communities (in the right places) in Ireland. I mean, from the get-go, the Dublin Docklands area had sustainability stamped right all over it, at the masterplan stage. It was ourselves that really managed to screw it up. We had no idea or plan for what we were doing, besides putting up as much concrete as we could find credit for, and allowing the remainder to cater for itself. Hardly a world beating model for the roll out of a sustainable, international standard living/working thriving urban hub.

However, the developers I know from my own experience had done certain calculations. They knew how much to spend on development and no more. They were used to operating within a certain climate in Ireland and had learned how to survive within it. One could argue that they helped to create that climate in the first place, or the lowest common denominator. But we as a nation also have a responsibility to create conditions off the bat, which enable private builders to aspire to more. Trying to argue that more 'liveable apartments' are required in the Docklands area is ridiculous. Trying to force those through legislation at planning stage is not good enough. If the average family in Dublin would not want to raise a family in Mayor Street.

Why don't families what to raise a family in Mayor Street? There is a whole raft of reasons and most of them would require audacious government scale intervention to correct. Ballymun regeneration for all its efforts suffered from the exact same problems. We have been sitting by and posturing about how great our efforts to turn around Ballymun have been. I don't think it stands up yet in all of the 5-stage model of sustainable development.

What I mean, is that regardless of whether it is private land in the Docklands or public land in Ballymun, we still have not figured out this process from end to end. In terms of families, communities, lifestyle, opportunities and economics. There are too many bodies, too many civil servants involved and too many people to keep happy. Not project can really carry itself and all of that weight at the same time. The one huge advantage the private developers I worked for had, was they knew how to keep things lightweight so that projects had a chance of getting completed. The public side of the fence, really hasn't to learn that about team building and team dynamics.

Trying to haul out private developers and point the finger solely at them, avoids the real problem, that we don't have the perfect model in an overall sense yet. As I said, the private developers are the ones who really understand how team dynamics work, and it is a pity there aren't the same skills in the public sector yet. Adamstown did look promising for a while though, and certainly the good press it received was deserved. But unfortunately though, if we could achieve the right sequence in Adamstown, then why couldn't we do it in more central areas aswell?

12. Construction costs have fallen dramatically as have finance costs both need to be carefully controlled by limiting development consents going forward to ensure that provision of space remains competitive.


Very good point well made. I think professionals have a lot to answer for here also. I can think of dozens and dozens of cases during the Celtic Tiger - even with the supposedly best architects in the country involved at the helm - where value for money ideas flew out the window. Designers have a really, really poor ability in this area. But in general, also have very clever arguments for trying to justify the crimes against cost-control they can commit. I think the basic difficulty here stems from the fact that Irish designers grew up in such a poor country, where they didn't have the opportunity to learn about money and how it aught to be managed. Then when the money came along, they simply had not to time or resources available to them to understand how well it can be managed. Designers really need to own up in this regard, and if they can't see a problem here, then that is the problem.

Where I think the design community really needs to focus is on the early stages of the model of sustainability I described. (Only until they have had a chance to upgrade their skills in cost control and construction, through working with people who really understand that area) Designers have so much more than anyone else to contribute in the early stages of the sustainable development model. I am all for building employment in those area for designers. But don't let them near construction. I really mean that, don't let them go near construction until they are prepared. And until we have sorted out a better model for how design teams can work. Something along the lines of what Amory Lovins in talkng about.

An advanced studies stream could be provided for designers who want to advance into the construction design stages. It shouldn't be taught by other professionals, but by people like myself who understand how things work on the cold face. I could certainly help in that area myself, as I know a lot of people I worked with who could do. But we are not going to get any kind of value for money in construction terms with consultants on the loose. I am pretty sure of that. For all of their best intentions they really haven't got the training. I could start with many of the published design awards selection there.

It is going to be hard to get designers to change for the better in this regard though. So much of their business model in the past depended on spending away too much money, to get far too little in return for it. There lack of construction skills and understanding was less exposed if they worked on smaller jobs. While their fees grew proportionally as the cost of construction went up for those smaller jobs. A lot of the 'award winning' projects every year are a result of finding that balance. For instance, a civil office for a regional authority, that looks like Bill Gates might live/work in it.

Of course, we were building from a very low base there also. For decades since the founding of the state, there was some kind of cosy relationship between owners of crumbling old Georgian building stock, that was rented to the state. When our involvement in the EU accelerated through various treaties and so forth, the Irish government was asked to clean up its act in this regard. We still cannot seem to find that right value for investment balance here. The OPW seems to be at the centre of this problem too. In that none of their employees appear to have ever worked in the real commercial world themselves.

I worked on one job where the OPW was the client and because the walls were circular, we had to install circular doors also. I am no carpenter, but I knew the guys installing the fittings and they could tell me exactly how much the price changes when you veer away from standards in components like doors. But the OPW attitude is that, if the budget was there, then lets find ways to spend all of it. It troubles me greatly that an awful lot of people involved in sustainability of architecture now, hope to get awayy with the same exact thing. That they will not be the subject of any real kind of cost efficiency benchmarking process - or even better, post occupancy evaluation to see what was necessary, and what wasn't. The RIAI journal certainly won't print anything like that, because it is compromised too. We are locked into a system of our own design, like a binge drinker or addict or some kind.

Lets bear in mind that there are highly trained designers involved there, employed by the state and who are responsible for delivering value for the state. Yet, their curriculum vitae shows no really honest experience in being the client. I was the client for a number of years myself, and boy is it different from graduating at the top of one's class at Design School. Which is what most of the OPW are, the top of their class at design school. This is why I worry that the OPW is involved in anything to do with sustainability. You need people who have experience being a client in the real world and being ones own boss. Guys like Michael O'Leary would be an ideal example of that. We shouldn't laugh at him, we should be asking him for his advice.

The over-reliance on construction is the major problem at present but a clear plan needs to be established based upon a shift from site opportunity led development to a system governed by tax breaks on sustainability and competitiveness criteria.


Like I said, don't rely on the OPW and design consultants in that regard at all. They have been compromised by too many years of experience working in a bent system. Unless you refer to getting them invovled in the early stages of the sustainability model, where I believe they are very well qualified, and yes, I would 100% support them. I think training can happen in the other areas, with the right communication between private sector clients/developers and the established construction professionals. This really needs to happen now, if we are to succeed. One group has never talked or exchanged ideas for as long as I have been around.

Neither seem to know it yet, but both have different parts of the greater puzzle already un-locked. It is only a communication barrier that is holding back progress. That is why I positioned myself squarely in the project management field a number of years back, and have worked my butt off trying to advance myself in that area ever since. I realized that trying to get myself featured in the design awards wasn't going to help the overall system to function better. One has to speak a few more languages than that.

The task of how we integrate the four or five great pieces of this puzzle is going to require the best project management skills we have. Think of it like putting together a complex working system, something like a Boeing aeroplane. Now there is something, you really don't want to leave up to designers alone. You don't want to leave it up to the bean counters either. But you do need to integrate both in some way.

How we get them to the hotel needs to be on a shoe string for now i.e. allow taxi's to use the port tunnel free and use the former truck lanes on the Liffey Quays to become a QBC/QTC. The days of thinking in billions are gone for now, you need to think in re-regulation and delivering stimulus not as dole but in making core industries more efficient; it is time for the rabbits to put on welding goggles and get on with creating the future.


Some excellent thinking coming out there. Keep it up, and keep on circulating the ideas out there. They are sure to be picked up sooner or later, or I have misread the world very badly indeed. I say that to the entire Archiseek group also. Keep up the work. Over and out.

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Re: The Question of Land

Postby KerryBog2 » Mon Jun 29, 2009 10:23 pm

It is nice to see something positive being put forward. Good post PVC, but as the French say, “MmmmmOui,” meaning they agree but not fully. Maybe I’m still too negative, but I think your property links have led you to overestimate the role for and the potential of the construction sector . Also we need a coherent new banking structure. What we currently have, at banking senior management level, is devoid of plain cop, and must go. For construction employment, stuck in my head is an EU average of about 7.5% of the total workforce, so it should be a bit lower for Ireland with the stock we have. That would put potential employment at about half your figure.

There remain a few elephants in the room, namely, (a) recognition by the population that it was jointly responsible for getting into this mess; (b) the structure and viability of existing construction players and (c) NAMA and the future.

The Population
What the French call “Moralité commerciale” was notably absent from Ireland ; very obvious and incomprehensible to me when I returned here in the winter of 2001. Greed and the fast buck was king, for everyone from the most basic tradesman to senior managers in all sectors. The Irish had lost the plot; they saw nothing wrong in regularly spending €1200 on a handbag or golf driver or €4,000 on a Villeroy & Boch toilet. (Brings new meaning to pi$$ing away money).

The majority of the population was out of touch with reality. Nowhere was that more obvious than in the construction sector, where, in 2004, a group of carpenters went on strike claiming that they are not being paid the agreed daily rate of €170 net. That was the then pre-tax equivalent of about €85k p.a. Two years later, in 2006, unskilled construction workers in Ireland earned an average of €756 per week, which was more than a month’s wage in the new EU- joiner countries, considerably more in some cases.

We as a population therefore need to understand that we caused the economic crap in which we find ourselves swimming or drowning. Government (including opposition) need to admit the same. Nobody likes being called a fool, (so politicians, with an eye to th etrough, will not deliver that message) but that is what the majority of Irish were in recent years. That message must be said, loudly repeated, understood and accepted. There must be a “mea maxima culpa” that it was wrong to just give everyone more money, or jobs, or buy in Cape Verde/India/Bulgaria/whatever. ( a la Bertie, “Ah, shur, it will be grand.”)

Structure and viability of construction sector.
With a very few exceptions, the current big players are dead. Many big suppliers are also dead. Those lucky (or prescient enough) to buy credit insurance will survive; currently insurers are paying out millions, and delaying paying out many more, if gossip is to be believed.

Commentators are slow to remark on the manner in which most builders & developers have structured their businesses. Most went for “unlimited” status during the boom years to avoid filing their financials and showing their vast profits (useful today for hiding their vast losses), but this is only a decoy. Inevitably the ultimate holding company is a limited entity, registered offshore which protects both their privacy and private assets. Intercompany debt, asset values and thus net worth even when figures are available are considerably disguised. Some have given personal guarantees (only to banks!), but where these exist they inevitably have been given a multiple of times to several banks. Not worth much, a legal quagmire and a delaying mechanism that will take years to unwind.

Omitting the financial institutions in the Irish Times Top 1000 list for 2004, the building industry related companies accounted for 147 (or 16%) of the remaining 920 companies. Those 147 had sales of €26 billion. Some of this is exports, because manufacturers and overseas subsidiaries and activities are included. The figures for 2008 are even higher, and show the magnitude of the problem when it is realised that the payment process for the costs element of those sales has ground to a halt. From the top of the pyramid downward, suppliers are not being paid. The message is going down the line that “we are awaiting payment on a big job that has been completed/signed-off on/whatever.” Prevaricate, delay, lie. Create longer snag lists, initiate proceedings. Whatever. Everyone is putting off the evil day of realising that the money is not there now and will not be there in the future. Round Two of failures will happen when NAMA starts.

Developer's arguments that “We have a great team people with the skills to bring projects to a conclusion” are, I suggest, nonsense. The disconnect with reality was enormous. During the boom, builders/developers operated on such huge margins that many never had to worry about accurate pricing. The odd bad debt did not matter, it could be absorbed. Credit control disappeared and credit terms were given out like snuff at a wake. (Developers just paid the interest and when the covenants were near breaching, banks revalued the assets upward). When work got scarce, tendering got more competitive; companies had no proper pricing models, poor credit control and project management skills. Several subbies went bang due to poor pricing; then, up the line new contracts did not easily allow for “extras” so they started to lose money and then fail. Enter our old friend the spiral.

Personally, I have not the confidence to accept that a developer who asks his wife for a figure to put in his tender for a site is capable of running anything, let alone for him to comprehend “Profitable Growth Orientation.” Similarly, someone who arrives at a parent teacher meeting by helicopter when he was 10 miles away by car rarely has the cop to run a “Lean Organisation.”

NAMA & the future
The hard questions are in relation to NAMA. NAMA will buy the dud properties from the banks at what level of discount? (Will they include Hotels? How will it interact with the Brit banks here?) Clearly the guys in the Dept of Finance have been out of their depth for quite a while, so what are the odds they will be taken for a ride by the developers?
The skills of running an intensive ward of sick companies are very different to new business lending.

So, expect a small discount on the buy-in, a bond issue and sale/buy-back, but at what repo rate? Enough hard questions: let’s ask a simple one: NAMA takes over a completed block of apartments, some occupied, but most empty. Twenty apartments have been sold, deposits paid, awaiting closure. Purchasers decide to forgo completion and lose deposits rather than take a hit on negative equity. Will NAMA institute proceedings for specific performance? What right of action will the existing tenants have against NAMA for not acting against the defaulting buyers? Who will pay the service charges?

The big elephant in the room is corporate enforcement, surrounding which there is deadly silence.
All senior bankers, from ordinary manager level up, are legally required to act with probity. (For bankers – that means integrity and uprightness; honesty.) IFSRA rules are very clear about this. Other professionals, like accountants, have similar requirements imposed by their professional bodies. Anyone heard anything from the void of accountancy bodies?

Senior bank managers and anyone who devised lending criteria or sat on a credit committee during the 2004-2008 period have a question mark over their acumen. Directors are in a worse position; if they were aware they should be fired immediately; if they were unaware, they should be fired for incompetence. The banking sector must delete its top level or it cannot ever extricate itself from the present mire.

I do not believe in the silence. Huge sums of money were moved around to dress up the dodgy balance sheets of banks. People spoke, phoned each other. These types of conversation, just like Dealing Room transactions, were taped. The Regulator must have known; even now, where are the tapes? Did anyone ask for them? Why the silence? Where are the journalists? Why no real questions? Maybe they are too interested in the length of the slit in Monica Leech’s skirt?

We saw what the accountants did to a defunct stockbroking firm in Cork a few years ago - they raped what was left, to the extent that the (broke) customers actually despised the accountants more than the stockbroker who ripped them off. Wait for the bun-fest that will be NAMA. The lawyers and accountants are licking their lips already.

Meantime, sit back, you will be told nothing. It will be in the National Interest to keep schtumm. It will go go away, Shur it 'll be alright. Enda’s bunch will get in, they will spend their days saying what a bags Brian’s bunch made of it. The Greens will be on the sidelines again, talking lightbulbs, like they did when Lehmans was sliding down the tubes last September.

As Myles once asked “Tell me this, how is it done?”
K.
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Re: The Question of Land

Postby garethace » Mon Jun 29, 2009 11:18 pm

What the French call “Moralité commerciale” was notably absent from Ireland ; very obvious and incomprehensible to me when I returned here in the winter of 2001. Greed and the fast buck was king, for everyone from the most basic tradesman to senior managers in all sectors. The Irish had lost the plot; they saw nothing wrong in regularly spending €1200 on a handbag or golf driver or €4,000 on a Villeroy & Boch toilet. (Brings new meaning to pi$$ing away money).


Excellent comments. I need to sit down and absorb them more. But there was one point I was hoping to insert if I may, about land. Apologises for the length again. It only occurred to me today, when I was thinking.

During the Celtic Tiger years a lot of people thought there houses were worth a lot of money. That wasn’t the case at all. The land on which their house rested might have been doing some strange and unnecessary things. That led ordinary people to equate 'value' with their homes. Homes are things that people feel emotionally attached to. They like to tell themselves they live in a good home. In modern society goodness often merges with the concept of monetary value. So in the Irish physic we must have had very ‘good’ homes indeed.

It got a lot worse. I often met socially with consultant architects during the Celtic Tiger. They were guys who would tell me after a sufficient amount of Guinness had been drank: That they had made millionaires out of their clients. It is one thing for ordinary common folk to mix up the price of land with the structure built on it. But for architects to allow themselves to believe it was terrible. In fact what was happening as the boom progressed, the architect was contributing less and less to the overall package. Indeed an architect could ‘add more value’ to the scheme now, in money terms, than he could ever do during the Celtic Tiger. Because land has come down in value since then, relative to everything else.

If you talk to many Irish folk today, they will tell you land is worth nothing. They will proceed to tell you that is good. Because it means the builders are in some serious hock. It is nice to make builders into these ‘straw men’ that are easily knocked over. They were too gullible. They should have seen that land wasn’t worth that much. It feels good to re-write history now and pretend we were not all caught up in the sordid affair.

The real truth is, for much of the construction boom, the builders were the most sane people around. They could separate the wheat from the chaff. I once completed a seven storey building, only to have my client the developer, want to demolish it all again and re-build something else there. The price of the land on which -his- building stood, had changed so much in value, it made demolition look feasible! Not in anyone's imagination, but in cold hard figures. It is not the developer's job to blow the whistle and call this practice un-sustainable. It is up to society.

That is the way we should look at North Wall Quay as a society. Do we believe it is sustainable to knock things down or not? I can assure you, that particular developer will not mind either way. It is only another day at the office. Do we believe it is sustainable to allow the value of land to swing up and down dangerously as it does in Ireland? The developer is running the calculations, and working with the principles of land economics in a fluid and often unstable situation. It is up to society as a whole to decide what degree of stability or instability it is willing to tolerate.

Because we don't want to pay a tax on land in Ireland, we are prepared to put up with destructive boom-recession cycles fueled by un-sustainable land speculation and faulty banking systems. Developers in Ireland have demolition in the forefront of their minds even when pouring the initial foundations. They are so used to dealing with the instability here in Ireland. Like I said, builders were the only people during the Celtic Tiger who understood exactly what was going on. Architects haven't a clue because their judgement is impaired. They become emotionally attached to their work, in the same way as people become emotionally attached to their home.

The thing one has to remember about architects is they got very sloppy. All of that good teaching they received in architecture school about considering a concept carefully and working down to the best solution. That went down the drain. The construction cost, as a percentage of overall value of the project went down and down. In that sense, architects lost all sense of perspective about cost control as time went along. Because even if they built something that was twice as expensive as what it should be, no one even noticed. That was insignificant compared to the price of land.

Those cost control skills are what the profession is most badly missing now. That is why this recession has been double tough for most professionals out there. They are not making many people ‘into millionaires’ now. This is another reason why I believe we need better understanding about land economics in Ireland. It is sad to see trained professional architects and engineers, who should know better, getting swept up in mass euphoria.

If more architects were able to do what Paul Keogh is able to do, tackle the issue of sustainability from a land economics point of view, then architecture as a whole profession would be better off. Instead of getting all precious and self-conscious about their own designs. Worrying about what design gets what award and so forth. As if investing the effort to design a structure to stand on a piece of grounds entitles an architect to some emotional claim. That is what I see lurking behind comments by Yvonne Farrell in Frank McDonald's recent newspaper article.

If more architects saw their designs physically demolished, they would learn how to overcome this emtional road block. That is what experience has taught me. The notion that there is some definable difference between 'architecture' and 'construction' is quite seductive to believe. (See introduction to Nicholas Pevsner's Outline of European Architecture) It plays to the ego of the architect. Developers are expert at playing on a person's ego and constantly push forward the architect as the 'inspiration' or brains behind the project. Architects tend to believe it, because they want to believe it. It suits developers because they don't want the publicity.

The notion of the architectural award for the best building in the world, or whatever else, has distracted architecture away from seeing reality. The reality we should be dealing with, and incorporating ideas to do with sustainability and so forth. Maybe the architectural awards circuit is a form of refuge from reality? Architecture has been very poorly served by the concept of design awards. That very toxic process begins in the schools, because award winning architects teach in schools.

Full credit has to go to Yvonne Farrell in one respect though. At the height of the Celtic Tiger building boom, Yvonne spoke to a packed lecture theatre about houses for an hour. She only needed to resort to the buzzword ‘property’ once in the hour. In fact, she didn’t even use it once. Because she was talking about a special ‘property’ of glass. At the same time everyone in Ireland was sitting in a pub, sloshing down Guinness and every second word was ‘property’. Why didn’t they go the whole hog and use the correct lingo? Real Estate, with a fine big American twang. I told this to Yvonne later, and I hope she took it as a compliment.


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Re: The Question of Land

Postby missarchi » Tue Jun 30, 2009 12:14 pm

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Re: The Question of Land

Postby PVC King » Tue Jun 30, 2009 8:46 pm

Property busts invariably involve bizarre stories like that 7 story block of flats, in Mid 2007 some nutter paid a net equivelent yield of 2.5% or 40 years passing rent for a fully rented eight story building in the square mile in London, the purchaser intended to secure planning for a 30 story block of luxury apartments within 500 yards of St Pauls Cathedral which was never ever going to get planning permission. Desk top valuations are almost as useful or reliable as the back of the 20 Major box method of conceiving a building as seemed to suffice in the 1970's!

I do however feel that the tone of the discussion has moved back to where most conversations have been recently i.e. diagnosing the mistakes and highlighting the one or two indivuduals who either diplomatically side stepped the buzz words or controversially predicted grief was around the corner.

There are KB as you point out four major issues to be solved

1. Getting the banking sector sorted
2. Dealing with employment overhangs in costruction
3. Dealing with excess inventory levels
4. Getting a poorly funded construction sector back on its feet.

In reverse order

4. Construction companies - do what the Fed did in 1931 with the banks, close every construction company for a week and decide which ones are solvant and which ones aren't; let those that aren't go into examinership. Award contracts for local authority housing refurbs that were to be PPPs as straight government contracts through a tender process to those that remain standing. Follow that up with retro-fitting energy efficiency initiatives in state buildings; build a global design powerhouse in this area to build on the research advantage that Kingspan have built in this area.

3. Get NAMA to take mananagement control of completed schemes or half completed schemes where the loans have become non-performing with no prospect of the borrowers raising 3rd party capital to complete specific developments or where a fire sale would see significantly below market prices acheived i.e. realising an unacceptable negative equity position. In terms of seeking court orders for specific performance for houses bought by booking deposits; I am not sure that would work many of those not completing are either unemployed or would simply leave the state to avoid sanction; many others have character and would take a long term view. Surely the objective needs to be to establish a clearing house to pair off would be tenants with stock overhang. Even if it were as simple as hiring people to put the distressed stock currently sitting in liquidated retail warehouse units into furnishing suitable properties to a lettable condition, hiring sparks, chippies and painters to complete second fix and decorate them and even redundant estate agents to answer the replies on daft; it has to be better than doing nothing; surely the one thing you can't afford is to have 50,000 houses lying empty and at the same time paying sky high taxes to cover international interest payments and dole payments for people who 95% of the time want to work.

2. What ever the true future employment levels will settle at long term it is clear that at least 100,000 and possibly as many as 300,000 people will not work in the wider construction sector again. They clearly need to be retrained or encouraged to move elsewhere; leaving that number of people on the dole is just too much of a waste of dreams and aspirations not to mention scarce cash resources. Further grant aiding hardwood forrestry and wind energy projects has to be a good start as no doubt many of the skills are similar from engineers down. This is certainly the greatest challenge and the most complex to find solutions for.

1. Getting the banking sector sorted; clearly the most complex and urgent challenge but one where if handled right there is clearly the greatest upside. Irish property debt has a very negative perception overseas as the scale of the bust is truely spectacular by International standards. On the upside a lot of the debt held by the Irish banks is in fact relating to property assets that are out of Ireland and it is highly likely that a lot of these markets such as UK, Belgium and Sweden both didn't become as distressed and are likely to recover a lot more quickly. You have to laugh Aiden Brooks bought the Shell Mex Centre (Shells UK HQ) on a yield of almost 6% or say 15 years passing rent and people were buying buildings iwth very secondary tenants in central Dublin at yields of 3% or twice as many years purchase; now the yields would be Shell Mex 6.50% with potential to come in to 6.15% and Central Dublin Retail 6.50% plus.

The presumption that 30% plus of property loans will fully default is in my opinion entirely flawed, the biggest gains to be acheived would be to sell the primest overseas assets at 90% of debt value and buy the bonds underpinning those debts at very deep discounts that in many cases equate to a price of paying 30% of face value of a 70% discount. Not for a second am I arguing that borrowers who are meeting payments should lose their investments but where loans have ceased to perform. I also have a couple of clients looking at specific investment opportunities in Dublin; whether they will complete these depends on the yields moving out slightly; this clearly proves that there is a level beyond which the sector can't sink.

As opposed to playing the blame game should you not be focussed on solving the four problems above and making sure that the next model is based on a presumption that builds in the economic cycle and not the flawed concept of whatever new pardigm is in vogue. Easier said than done but if you repeat the negative often enough you start to believe it yourself.
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Re: The Question of Land

Postby garethace » Tue Jun 30, 2009 10:39 pm

Construction companies - do what the Fed did in 1931 with the banks, close every construction company for a week and decide which ones are solvant and which ones aren't; let those that aren't go into examinership. Award contracts for local authority housing refurbs that were to be PPPs as straight government contracts through a tender process to those that remain standing. Follow that up with retro-fitting energy efficiency initiatives in state buildings; build a global design powerhouse in this area to build on the research advantage that Kingspan have built in this area.


A lot of people I know and respect in the construction industry would agree with you there.

Working for Danninger was a different story though. We had the considerable luxury of not dealing with other peoples' problems. We were almost self-contained and this allowed us to slash costs out of the business. Perhaps the industry wasn't ready though for that radical an approach. I amassed around 60 hours solid I estimate, of on-the-job health and safety experience, dealing with a wide range of other construction trades.

That level of exposure to crucial components of sustainable development, simply isn't possible working for high street consultant architectural practices. This is why I feel we need a diversity of business models in design and construction. Certainly everyone following the same kind of rules will not enable us to explore all dimensions of sustainable development. Yet most people who knew me, couldn't understand why I would want to work at an office that started at 8.00AM in the morning and took half and hour for lunchtime. The same as the guys on site were doing.

Danninger was a bit like Ryan Air mixed up with elements of Nissan Lean Manufacturing all rolled up together. I met a lot of brilliant people in that company, many of whom were poorly understood by the industry and other professionals. I was disappointed they aren't allowed to finish North Wall Quay. It would have been the ultimate 'proof of concept' for them. Some of my motivation in writing here, was to try and tell the story as best I can.

Get NAMA to take mananagement control of completed schemes or half completed schemes where the loans have become non-performing with no prospect of the borrowers raising 3rd party capital to complete specific developments or where a fire sale would see significantly below market prices acheived i.e. realising an unacceptable negative equity position.


I hadn't quite understood this myself before now. As I mentioned above, I was working inside my own little micro-version of the Irish construction for the last couple of years. Thanks for taking the effort to explain this so clearly.

I am not sure that would work many of those not completing are either unemployed or would simply leave the state to avoid sanction; many others have character and would take a long term view. Surely the objective needs to be to establish a clearing house to pair off would be tenants with stock overhang.


Have a listen to the ideas discussed by Chris Cook in relation to Limited Liability Partnerships. The complete lecture (a diagnosis of the Credit Crunch, plus Unitisation as the solution) is here:

http://www.feasta-multimedia.org/2008/Chris_Cook.mov

and the slides are here:

http://www.slideshare.net/ChrisJCook/equity-shares-a-solution-to-the-credit-crash-presentation

Feasta invited Chris over to discuss his ideas with the Urban Forum late last year. Chris Cook is used to working with the oil industry in the middle East, where that kind of financial model is common. Chris believes there is an opportunity for a new approach in Ireland to the legal and financial structure of development which may solve many of the problems of the conventional model.

Even if it were as simple as hiring people to put the distressed stock currently sitting in liquidated retail warehouse units into furnishing suitable properties to a lettable condition, hiring sparks, chippies and painters to complete second fix and decorate them and even redundant estate agents to answer the replies on daft; it has to be better than doing nothing;


Excellent point. I had a conversation very similar to this with Dave Wetzel, who could relate from his own experience at Transport for London. To be honest, the model used by Danninger isn't much more complicated than the above. That was their backyard, their bread and butter. It is a very successful model too, in a small country such as Ireland. It is sustainable in a kind of way, that not many other models are. You would be surprised too, at the speed at which sophistication can grow inside that set up.

I knocked up many a fine conversation with sparks, chippies and painters. I valued and respected their input, as they in return valued mine. We each had our own race to run, but it felt at times as though we were running in a race together, rather than against one another. I can endorse this model from my own personal experience and it does give one a sense of achievement when you succeed in completing a job well.

The only thing it doesn't allow one to do, is make reference to Nicholas Pevsner about the difference between 'architecture and construction'. You have to come down off your high horse. Not everyone who calls themself a professional is willing or able to do that. This is the point Frank McDonald always missed. Never once in all his publishing career, did he ever give Danninger the level of credit it deserved. It would have made him exceedingly unpopular with the architectural establishment.

This Irish Times article is good, though it seems to be what the Irish Times prefers to publish:

http://www.irishtimes.com/newspaper/features/2009/0630/1224249776560.html

What ever the true future employment levels will settle at long term it is clear that at least 100,000 and possibly as many as 300,000 people will not work in the wider construction sector again. They clearly need to be retrained or encouraged to move elsewhere;


Good point, well made indeed.

leaving that number of people on the dole is just too much of a waste of dreams and aspirations not to mention scarce cash resources.


Big Time. Towards the end of the Celtic Tiger I was astonished to witness the influx of personel from the service industry sector into the construction industry. Of course, those kind of people are high equipped and versatile enough to move anywhere they want to move. They were really needed at the height of the Celtic Tiger in the construction industry.

I kept on reading stories in the newspaper about Irish builders. It seemed that every time a builder bought a piece of land, they set up a brand new company to go with it. I felt sure there must be some reason for that. I asked a financial director (past experience was working at Microsoft) working for a construction company then, to explain the reason.

He told me quite plainly, that since the builder had employed him he had stopped this practice of setting up new companies each time another field was purchased. As an accounting professional he couldn't see any reason for it. He basically put it down to the fact that builders had always done it like that and didn't know any better. That left me kind of stunned to be honest.

As i will further outline below, the land professions in Ireland are trying to rise up from a very low base. That includes the culture amongst architects in my view.

You have to laugh Aiden Brooks bought the Shell Mex Centre (Shells UK HQ) on a yield of almost 6% or say 15 years passing rent and people were buying buildings with very secondary tenants in central Dublin at yields of 3% or twice as many years purchase; now the yields would be Shell Mex 6.50% with potential to come in to 6.15% and Central Dublin Retail 6.50% plus.


This point made here, very neatly sums up my opinion why land professionals from the United Kingdom are different from those here in Ireland. We tolerate a lot more slack here in Ireland. There is a reason for that. If you are not able to perform at a certain standard, builders and investors simply stop doing business with you and find a team that was more competent. There is more work to be had, and competent builders will not waste their efforts with amateurs. In Ireland you can get away with a lot more. That is part of the reason the model used in the Celtic Tiger proved itself too weak and un-sustainable.

In Ireland where competition for the same bit of work is higher, standards tend to drop across the board. We need to be aware of this and deal with it. We aren't used to populating spaces. We are better an emptying them in an organised and systematic way. It was a very pleasant surprise to me as a young architectural student to hear someone such as Sean O'Laoire talk about our population getting bigger and more diverse. It still is, interesting to listen to them talk like so.

But to a large extent, that generation of land professionals here in Ireland operated like gentlemen farmers. There wasn't too much expected of them. In essence, we should demand more of our professionals and their organisations if we want to build the new Ireland. That will mean working against a culture and some habits that have bedded themselves in.

The point was very neatly summed up by Merit Bucholz. If you looked at the Central Bank building in Dame Street, and you studied the structure. There is no way it was ecnomical to build, without going a few stories higher. Especially given the cost that was thrown away in the structure alone. That is the kind of base we are working from.

Irish property debt has a very negative perception overseas as the scale of the bust is truely spectacular by International standards.


I agree with that. That is why I felt particularly strong that as a nation we should concentrate our efforts to try and finish some of what we started. I also thought Frank McDonald's advice was very good. We shouldn't go racing off down to Poolbeg penninsula when so much of the land further up the river is still un-developed.

The same point was well developed by Paul Keogh in his essay. That many Irish towns had zoning for populations far in excess of their current size. As a developer friend of mine said, many of the towns around Ireland expanded in physical size by 200% during the Celtic Tiger, but their populations remained exatly the same.

Clearly this practice in Ireland of drawing boundary lines between town and county. . . and all of that, makes for some awful planning practices. One of the best examples I know is Sandyford industrial estate. It became one of the biggest employment centres in the city of Dublin. Even when it contained hundreds if not thousands of hungry construction workers aswell, it still only had one Centra shop. Which had a queue like that for a football match every day at 10AM.

Someone explained to me the reason for this a long time ago. DunLaoghaire Rathdown county council was able to grant permission for developments which would never get through a couple of miles down the road in Dublin City Council area.

whether they will complete these depends on the yields moving out slightly; this clearly proves that there is a level beyond which the sector can't sink.


That has been my own impression for the last six months. That is why I think if we lever new innovations like 'sustainability' of development at different levels, things might begin to happen.

As opposed to playing the blame game should you not be focussed on solving the four problems above and making sure that the next model is based on a presumption that builds in the economic cycle and not the flawed concept of whatever new pardigm is in vogue. Easier said than done but if you repeat the negative often enough you start to believe it yourself.


The best way to avoid this potential trap is to get busy working on something. I do hope that enough architects get involved in the workshops at UCD 'What Now'. But I had something in mind myself, a kind of project that would involve many different organisations working towards some common goal.

http://designcomment.blogspot.com/2009/05/notes-on-smart-economy.html

If you ever have an opportunity, check out a book called 'The Grid' by Peter Schewe. In which there is a chapter describing the Tennesse Hydro-Electric project instituted by F.D. Roosevelt. Very interesting stuff indeed. It was organised by an overall managing director, a lawyer with a background in dealing with utilities etc. One cannot help but think of Treasury Holdings and their disputes with the ESB here in Ireland.

But in a sense, this brings in the discussion a point made earlier about a fifth stage of development. One in which the government is involved. You could imagine a role here for the Treasury Holdings boys, but in a way that served some public good, rather than trying to battle over scraps with neighbours etc.

A big part of the trouble, from my limited view, is with land professionals. Not very much was expected of them. They were never an important component in the equation. The classic question in Ireland was how to remove people from the land in some organised fashion, rather than populate it. It normally went something like this.

My Grandfather was the last of six or seven children, as I understand to it. He was the only one to stay at home in the small parish where he grew up in rural Ireland. Most of my family live in some other country. My Grandfather would have left the country also, but gave his boat ticket to his brother. Because my Grandfather had learned a carpentry trade, it was felt his stood a better chance staying in the country. The only trade his brothers knew was fighting a war for independence, which consumed a lot of their youth and innocence no doubt. It is the same story in every poor working class family in the country.


Brian O' Hanlon
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Re: The Question of Land

Postby wearnicehats » Tue Jun 30, 2009 11:11 pm

what is it you actually do?

you seem to be intent on turning this website into one giant, long - very long - personal dissertation
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Re: The Question of Land

Postby garethace » Tue Jun 30, 2009 11:51 pm

wearnicehats wrote:what is it you actually do?

you seem to be intent on turning this website into one giant, long - very long - personal dissertation


Apologises. I do my best to restrict contributions from now on. Promise.

Best of luck.

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Re: The Question of Land

Postby missarchi » Wed Jul 01, 2009 2:12 am

some people get irritated over small things he launched a campaign...

http://www.irishtimes.com/newspaper/commercialproperty/2009/0701/1224249828802.html
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Re: The Question of Land

Postby KerryBog2 » Wed Jul 01, 2009 10:33 am

PVC King wrote:
4. Construction companies - do what the Fed did in 1931 with the banks, close every construction company for a week and decide which ones are solvant and which ones aren't; let those that aren't go into examinership. Award contracts for local authority housing refurbs that were to be PPPs as straight government contracts through a tender process to those that remain standing. Follow that up with retro-fitting energy efficiency initiatives in state buildings; build a global design powerhouse in this area to build on the research advantage that Kingspan have built in this area.
............
As opposed to playing the blame game should you not be focussed on solving the four problems above and making sure that the next model is based on a presumption that builds in the economic cycle and not the flawed concept of whatever new pardigm is in vogue. Easier said than done but if you repeat the negative often enough you start to believe it yourself.


I disagree. With respect PVC, I think you are missing the point. To close all construction companies for a week would not be sufficient time to ascertain anything. Because of interdependence, cross debt, etc., a month would not be enough. Tinkering with what is there is like rubbing antiseptic on a cut artery. More than 90% are too sick to survive. The construction sector, though it has a will to live, is beyond help in its present guise. Were it a horse, it would be put down. The fundamentals of the entire sector need to be changed, and land is at the root of the problem.

Land and houses have both independent and combined values and always will have them. What most Irish punters never did was to separate the combined factors that make up the value of a “property.” This allowed the site cost to assume a value far in excess of its real worth. They were not prompted to analyse anything because they believed the puff in the property supplements, had no unbiased comment on sale values, and lived with a non-efficient Land Registry system. Auctioneers & estate agents were quite happy to add to the silence – or even misinformation - as the greater the price, the more they gained from fees and mortgage brokerage commission.

We need to look at the existing stock of empty dwellings and put a value on them. They will not sell, ever, until realistic buyer value is offered. In the USA, the norm for housing is to have a site value at max 25% of the total price (which is why some houses are moved, literally.) In Europe it is considerably less, with 15% being the norm in Portugal.
In Ireland the site cost element is nearer to 50% and often much more, (which is why we see houses being demolished to fit 2 or 3 on the same site.) It also is why some developers (and others) got so rich so fast for doing nothing other than a gamble on a planning/zoning/density play.

In France the price of all properties is judged by the local price per square metre. This is widely available – a typical site is here http://www.immobilier.com/page-prix-au-m2 and is consulted by anyone changing property. In Ireland, to arrive at the value on any property, note has to be taken of the demographics, building costs and location.

Demographics.
Supply and demand. In 2005 the Republic of Ireland had a population of about 4 million. The median age was 34 years and 36% of the population was aged under 25 years. Good indicators for a housing market.
People in Ireland buy houses at a younger age than most, so in 2005 the average twenty-something sat the Leaving Certificate eight years earlier. In the 1996/7 academic year 59,000 finished secondary education. That is a reasonable guide to a basic estimate of our housing stock needs in 2005.
What happened in Ireland in 2005?
• Over 86,000 dwellings units were completed.
• New dwellings were completed at a rate of 21 units per 1,000, adding over 5% to existing housing stock. This was the highest rate of residential building in the EU.
• Residential construction accounted for two thirds of total building and construction output.

On those figures, how can it be suggested that developers were sane?

Building costs
You professionals here would have a better grasp of these than I do, but I suggest a rate of Euro 1100 a sq.m. for ordinary and 1400 for top quality finish. Those figures could be reduced when economies of scale are factored in. We also need to get over the idea of outlandish fixture prices (boasts about €50k bathrooms and €100k kitchens, “My awrchitect said we should allow at least 10% of the cost of our new house to spend on a kitchen.”)

Location.
Location is dependent on available zoned land and land in general. In Ireland our total land area is 70k Sq.Km. (France is 550k Sq. Kms., Belgium 30k, Czech Rep. 79k , UK 245 Sq.Kms.)
Comparing population densities with other countries in the EU is not very appropriate, because 40% of Ireland’s population live within 100Km of Dublin, thus skewing the density figures (and also creating the commuter logjams.) However, it should be noted that the divergence between here and the UK is huge – 60 people per sq.km here compared to 244 in the UK. Yet property prices in the UK are considerably cheaper than here, and are being skewed upward by CRISPI’s (cash rich Irish seeking property investments).

Ireland’s major cities and their environs have a limited amount of coastline, views over mountains/water/golf courses, DART/LUAS access, so demand will push up the value in areas with the “special” factor. Factors like roximity to schools, universities and being in a settled community also have major influence.

The real value of any house is based on a mix of the foregoing. So, take a terraced or semi detached 100sq m house, of the type typically built by the local authorities in the mid1900’s, located in say Dalkey. These houses are small, could be valued as follows:
Building cost = €140k
Site value calculated @ 30% = €42k
Coastal situation, add 10% to site value
Special situation - 0
Views - 0
Dart/Luas - add 10% to site value
Schools/unis - add 10% to site value
Community - add 10% to site value

So we arrive at a value of €199k, of which the site is just 60k or 30%. (With a density of at least 30 per acre, that works out at about €2 million an acre.) Suppose my figures are out – double them, giving a value of €400k. Not enough for Dalkey? Treble them, €600k.
What were these houses selling for a couple of years ago?
On average, it was €1.2 million.

That is what people have to get their heads around. Why should a council house in Dalkey be worth more than a luxury apartment in a NYC Upper East Side highrise?

K.
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Re: The Question of Land

Postby missarchi » Wed Jul 01, 2009 1:18 pm

the banks won't like this but put it out there...

(zone one) 15% unemployed = 5 years on benefits home min 90 sq m + land
(zone two) x % = 5 years on minimum wage home min 90 sq m + land
(zone three) x % = 5 years half average wage home min 90 sq m + land
(zone four) x % = 5 years average industrial wage home min 90 sq m + land
(zone five) = 5 star no limits

- 10% dart 1km
- 10% bus lane 1km
- 10% metro 1km
- 10% major cycle route 1km
+ 20% outside 40km of city centre ( existing homes only the green wedge)
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Re: The Question of Land

Postby wearnicehats » Wed Jul 01, 2009 4:23 pm

missarchi wrote:the banks won't like this but put it out there...

(zone one) 15% unemployed = 5 years on benefits home min 90 sq m + land
(zone two) x % = 5 years on minimum wage home min 90 sq m + land
(zone three) x % = 5 years half average wage home min 90 sq m + land
(zone four) x % = 5 years average industrial wage home min 90 sq m + land
(zone five) = 5 star no limits

- 10% dart 1km
- 10% bus lane 1km
- 10% metro 1km
- 10% major cycle route 1km
+ 20% outside 40km of city centre ( existing homes only the green wedge)


The banks would only not like it, of course, if they knew what you were on about
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Re: The Question of Land

Postby garethace » Wed Jul 01, 2009 6:15 pm

Land and houses have both independent and combined values and always will have them. What most Irish punters never did was to separate the combined factors that make up the value of a “property.” This allowed the site cost to assume a value far in excess of its real worth. They were not prompted to analyse anything because they believed the puff in the property supplements, had no unbiased comment on sale values, and lived with a non-efficient Land Registry system. Auctioneers & estate agents were quite happy to add to the silence – or even misinformation - as the greater the price, the more they gained from fees and mortgage brokerage commission.


I would accept that Property Developers did absolutely nothing during the Celtic Tiger to educate their own marketplace. (This should be the first stage in any good sustainable development model) In fact, I would say property developers did invent most of the mis-information out there. But property developers knew what they were doing, and they knew it was un-sustainable. Thanks for adding the above useful comment. George Lee's program, How we Blew the Boom was interesting to me for one reason. I hadn't paid a great deal of attention to 'the bigger picture' throughout the nineties and nauties. George did manage to put it all together somehow into one complete narrative. That was very useful for myself I must say, as someone who doesn't keep current with affairs nearly enough. In the TV feature George Lee explained quite neatly how everyone was being paid off in some shape or form.

I saw a piece of land, it was really the lawn of a fairly modest house in Kilmacud sell for €450k plus at around 2007. The house that was placed on that piece of ground isn't even large enough to accomodate one decent sized bedroom. So I know, that the piece of 'construction' in total might have been built for 60k. They often talk about developers of multi-dwelling schemes paying too much for land. The baron of Ballsbridge seems to be dragged out every time, someone wants to make a plausible point about land values. But what amazes me, is that smaller scale punters - guys putting one unit on a small plot, were not doing much better.

I saw a lot of minor densification going on around Kilmacud at the same time. I would often see a house being demolished to fit in two nice dwelling units. Some interesting solutions were invented, such as shared driveways and all sorts of things. But I still think we need the bigger players around, and larger scheme. If one really wants to create density in the suburbs, where you have high quality transports nearby etc. The original idea of larger schemes was coming from sustainability. Higher density in central locations. But what happened was a good idea such as higher density, became high-jacked by an improper idea: over-production. Most players were compromised at that stage, and the end had to come.

I heard Dick Gleeson, Dublin City planner express satisfaction in 2007, that densitites achieved in Dublin developments were comparable to the best anywhere else in Europe. Unfortunately though, he did not mention the fact that residential production of units was higher than anywhere else in Europe. That should have been carefully managed. It was as if, we had got very good at delivering one kind of sustainability - density - but traded that all away with the other hand, in falling into the trap of over-production. That is why I wanted to develop some simple 4 or 5 stage model for sustainable development. To allow people to engage in a model that is a little more sophisticated, but still simple enough to carry in one's brain.

http://designcomment.blogspot.com/2009/06/multi-layered-definition-of.html

(Notice the implication with the Kilmacud house, that it was 'sustainable' because it was near a Luas line. This underlines how shallow our current definition of sustainability really is. The fact was, the land value was almost 10 times the construction cost. That was the kind of flawed model we had ended up with by 2007 . . . now if we can't even improve on that going forward, we might as well give in) The most dangerous to my mind, is that the word sustainability has become monopolised by a bunch of green eco-hippies, or light bulb freaks who can't seem to extend their awareness to anything like land economics. Not to mention the fact that putting a windmill on your roof is like throwing good money after bad.

http://withouthotair.blogspot.com/2009/06/how-much-can-one-drinks-bottle-achieve.html

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Re: The Question of Land

Postby PVC King » Wed Jul 01, 2009 8:04 pm

KB think you both miss the point on land, it is not something that can be compared to construction in terms of asset inputs to value. 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.


For the market to recover four things need to happen; people need to be employed, they need to be in a position to secure finance, they need to deem the property of a decent standard or capable of being converted into a decent standard but above all they need to have confidence that prices will not fall any further.

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.

If people pay €450k for a postage stamp plot then clearly the 3 year earning rule failed due to very poor due diligence and underwriting standards in mortgage lending departments. Not a mistake that one would expect to see for another 29 years or so. Another indication of market failure are the towns in the outer commutter belt where housing estates of 50 plus units lie half built because the existing 2,000 people in the town simply have no demand for them
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