The Question of Land

Re: The Question of Land

Postby KerryBog2 » Wed Jul 01, 2009 10:45 pm

PVC King wrote:..........It is more a product of the bid rents that the market establishes. It costs not much different to build an identical house in Dublin, London or Cannes however the market bid rents are different. I do however agree that if construction costs fall some of it is likely to be passed on and more marginal projects become viable.

In Dublin you have a mortgage market based on three times salary, in London 4-5 times and in Cannes you have a product of imported bid rents from other markets.
...........The key steps are to stabalise the finance markets, secure and rebuild employment levels and remove stock overhang finally they need to rebuild the capacity to deliver a quality product and stable or rising prioce matrix so that a new market is willing to go to the finance markets and take on what is a very long term commitment.

If you concentrate on those 4 issues the construction sector can be restored to health in a 3-4 year period. If finance remains challenging or overhang persists it will take a lot longer.



I see what you are saying, BUT :
Rightly or wrongly, the average paddy does not give a damn about the present construction sector. To him it is synonymous with in-your-face builders/developers/estate agents and is glad to see them get their comeuppance. He wants, and believes that it will come, a construction industry that provides a quality product at a fair price. That is why Paddy is not buying.

I disagree on your pricing comment. A few years ago I rebuilt a house in Kerry for not much more than double what I was being quoted for a two-car garage in Dublin. The garage is still unbuilt. Bad example, Cannes, it is for Russian oligarchs and bling Paddies but still cheap by Irish standards. Instead, look at what is happening in Nice and the cost of property there. Far cheaper than Ireland, despite good demand, a university, a port, an international airport, a tramway and superb rail connections, all in a world-renowned tourist location. Alongside, in more expensive Cap Ferrat/Villefranche, so much of the property is owned by Irish that they drove up the price, which now is falling due to their departure. Strange to think that Paddy had a big influence on property prices in the Cote d’Azur.

Bid rent formulae and methodology are fine when you can quantify leisure time, commuting time and income. However, big question marks hang over most of the inputs because nobody knows how secure their employment is, and what their income (if any) or commute (if any) will be six months hence. As a result, both leisure time and consumption are either big unknowns or variables, so in today’s Ireland that formula is out the window.

I agree with the need to sort out financing, property overhang and general expenditure. This recession is a marvellous opportunity to get this country on the right track. It is specious to say “out to get the builders” – finally, people are getting the message, we were off the rails and the product being offered by builders was (a) crap and (b) vastly overpriced. That is why it will not sell and why no-one will buy. The 20-somethings that did not buy have had the crap scared out of them, seeing their friends in negative equity. It will need a bigger drop and a longer time before new buyers appear. Let the builders close down. They were inefficient. Use the best to complete semi-finished projects in viable areas. Use them for start-up offices for anyone from the dole. Free rent for a year. That will help the overhang.

We do not have the money to pay our present Public Service, or pay outlandish amounts to product/service providers. Builders also fall into that category. Why do we need 20-odd VEC committees AND a Dept. of Education? We have dozens of quangos, local authorities, e.g. we have a South East Regional Authority and a Southern and Eastern Regional Assembly. What do they really do that is different? (Actually, what do they do?) Merge, with staff cuts, or close them down where appropriate. If they do not like it, and go on strike, let them, lock them out and then we do what Reagan did to the air traffic controllers. Lots of people out there better qualified and looking for jobs.

What are the planners doing now that there is no development? Could they not be put to work on a proper, cohesive NATIONAL plan? Anyone want to ask a hard question about the windfarms that are an eyesore on a growing number of mountain tops? We need politicians with vision, who will take tough decisions, communicate and LEAD. We have a government that mumbles/bumbles/waddles along like a fat duck and an opposition that is no better. That is what scares me and keeps me negative on the the length of time we will have to endure this mess.

Sorrry for another long post, but to paraphrase Oscar W. I did not have time to write a short one.
Rs
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Re: The Question of Land

Postby missarchi » Wed Jul 01, 2009 11:13 pm

PVC King wrote:housing estates of 50 plus units lie half built because the existing 2,000 people in the town simply have no demand for them


That's why you have the population zoning model for the state.;)
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Re: The Question of Land

Postby garethace » Thu Jul 02, 2009 6:51 pm

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


What really cracks me up, was the fact the €450k post stamp plot was purchased by light bulb fanatics, who proceeded to sing the praises of their construction. That it was so efficient and environmentally friendly. If we don't extend the definition of sustainability beyond light bulbs and solar panels fairly soon, we are deep trouble. Some people have a bare faced cheek to talk about sustainability, when their holistic vision doesn't extend much further than showing off their Eco-bling.

Over-production is not so difficult to understand, when you get some handle on construction costs versus land costs. As the price of land goes over and above the price of construction, it becomes much harder to control over production. The mental arithmetic that people begin to do is something like: I have a piece of ground, that is the major cost taken care of. All I have to do is add some more, by borrowing or whatever, to pay for construction and I have done a good days work. It also feels good to be a builder. It feels like you are busy, you are working and you are making some positive contribution to society. That became the rational way of thinking all over the country.

In fact, if you could buy fields in Leitrim at a 'discount' over fields in more central locations, then the attraction to build became even stronger. What I mean is that, when land values get out of control, the traditional 'brakes' that should apply to over-production of dwelling units (or any other form of real estate) are taken away. There is not public body or administration in Ireland whose job it is to apply brakes, when cost of construction no longer functions as a brake. That is my point about North Wall Quay. At some stage, society itself has to decide when and where to apply the brakes.

I remember in Argentia, or some other one of the large South American countries they found themselves in trouble a while back. I think the solution they employed was to tie their own currency to another strong international currency, the dollar. What happened was a period of new prosperity and wealth in that country. I think something similar happened in Ireland, in that land became the new currency. Everything tied back to that in some way. It was successful for a while. But it should only be considered as part of the initial boot-strapping process. Beyond that it is too dangerous.

In the South American example, they held onto the dollar peg for too long and it ended up causing them further trouble. I suppose you could say the same about Ireland. At one stage the currency of land offered us a vision of wealth and prosperity we never had before. It allowed us to think bigger and bolder - that can be harnessed for positive ends, if you have the right plan. But even green party affiliates I knew who would build a super-insulated, super efficient house were affected by the land boom in Ireland. We would have finished a site visit to some Eco-home or other, and after the visit, the hardened green designers would wink and nod to each other, thanking this land boom which had enabled them to take out loans for renewable technologies and super insulation.

We really need to assess in this country how we look at commercial property. There is a particular kind of over-production at work there, in the way available floor space overhangs the market but lies vacant for years and years. The developers who produced that floor space, often knocking down existing smaller scale rubbish, are in no rush to generate income from their floor area. They have no wish to utilise the space, but are content to wait and wait to land the one big fish. A tenant who would take a large chunk of space at the one time.

In a smarter economy, there is more pressure applied to available resources to make it pay for itself. What we don't have in the commercial property sector is any kind of advanced commercial letting model that could support a smart economy. In today's digital age, an office can start off with a brief case, and where the business startup is successful, can expand quite quickly to require a small office, and so forth. During the Celtic Tiger, in many key strategic areas of our cities, I think the smaller business was ran out of the market.

I think in the mid to late 90s, the smaller business startup might have had more of a chance. Because there was the space available to them. That in turn is what might have kick-started a healthy economy. We need to take a look at how inner city renewal works with regard to commercial lettable floor space. It would make more sense than building larger apartments that people cannot afford. As the architect Herman Hertzberger said about his famous office developments of the 1970s. They weren't office buildings, they were settlements.

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Re: The Question of Land

Postby PVC King » Thu Jul 02, 2009 7:04 pm

garethace wrote:I remember in Argentina, or some other one of the large South American countries they found themselves in trouble a while back. I think the solution they employed was to tie their own currency to another strong international currency, the dollar. What happened was a period of new prosperity and wealth in that country. I think something similar happened in Ireland, in that land became the new currency. Everything tied to that.


Myself and Dick D were in Buenos Aries in January 2002 purely by accident, it was an ugly time to see a very beautiful city; what they did was to write off all loans below $100,000 and keep remainder open. Needless to say there were many people who lost their deposits and had a mortgage for excess of $100,000 US; those type of write offs are never equitable as they reward irresponsibility. People if they really want to walk away can simply go to Australia and deal with the banks in a few years when they have a wedge to present the bank against a debt long since written off. In so doing they have a 3-5 year record of good credit to offset their bad credit, out of sight out opf mind.

In respect of commercial property you are absolutely right; developers only built large floor plates and it was very hard to grow organically in the same premises. You get the feeling that this will change in the current market. All income is good income today. I would suggest that the Anglo HQ be completed and space be made available for small start up Financial companies operating much the way that the principal of the law library works.

KB

You are probably right that construction costs were off the scale for a while in Dublin; the problem is the percentage based fee scales that the QS/project management indusrty works to makes it very diifcult for the SCS to compromise their members by criticising the fact that prices bore no relation to European norms. Now that they probably do it would be a good idea for the SCS to publish a pan-European comparison table to highlight the probable good value on offer. They must however learn the lesson that if severe deviance from the meadian occurs again it will be short term gain long term pain.
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Re: The Question of Land

Postby garethace » Thu Jul 02, 2009 7:16 pm

In respect of commercial property you are absolutely right; developers only built large floor plates and it was very hard to grow organically. You get the feeling that this will change in the current market. All income is good income. I would suggest that the Anglo HQ be completed and space be made for small start up Financial companies operating much the way that the principal of the law library works.


I had to smile a month ago, I was looking at a fit out crew going into a block that had been completed for a number of years. I did a feasibility study for that block, to see if the floor plate area could be enlarged in some way to answer calls from large tenants in the market. (There wasn't enough space, even if the large tenant took all of the floors) I asked the foreman what was happening and he told me the different individual floors had taken by smaller tenants. How things had changed I thought.

I know a couple of architects who are busy fitting out the 'grey market' where banks etc were quietly making their floor space pay by sub-letting it. In both these examples, you can see activity happening, albeit at a modest scale, in the middle of a recession. This is the point I keep wanting to get across to people about commercial property. The likes of Dell computer corporations are always running on a finite schedule of works in this country. We need to learn how we accomodate both up-scaling and down-scaling, prefereably on the same 'campus' or settlement.

The old concept of mixed use, that the original docklands masterplan was built around did not address the issue of the new smarter economy. Reading Richard Sennett for me, was a great way in which to understand the new tenants who take up the floor space in today's world. It is not a nice world, that Richard Sennett describes in many ways, but our approach towards spatial planning and development should endeavour to fit around it as best as possible. To make the journey for the ordinary worker in the knowledge economy as pleasant a one as possible. Like Rosabeth Moss Kanter's expression: When Elephants Learn to Dance.

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Re: The Question of Land

Postby PVC King » Thu Jul 02, 2009 9:31 pm

Grey space tends to follow financial services employment culls; it was very prevalent after the dot com bust of 2001 but as the tenancies are on short notice the users of such space enter the market themselves for their own space as the market picks up. It is very good for fit out contractors as the tenant usually hires them twice in a cycle, i.e. once to put in the grey tenant and once to put their newly hired own team in; investment banks are great at hiring large numbers of graduates and ditching them at the next recession, anyone who makes it to 50 at Goldman Sachs or Morgan Stanley is pretty impressive. There is something very surreal about these projects the papers are full of a failing market but you have to work to even tighter deadlines to put the new co in! Almost like a timewarp back to the boom for 2 -3 months!

On reflection I think the conclusion has been reached that rising input prices got us into the mess we were in from a speculative land bubble to contractors not applying realistic pricing to a fear that the spiral would continue indefinitely.

The hangover is clearly lack of finance which is another conversation, lower construction prices which appears to be happening - what are average construction rates per square meter for mews developments in Dublin and what were they in 2006?

The real challenge though is to figure out what is going to be done for the 200,000 unemployed construction industry professionals and tradesmen?
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Re: The Question of Land

Postby garethace » Thu Jul 02, 2009 11:09 pm

There is something very surreal about these projects the papers are full of a failing market but you have to work to even tighter deadlines to put the new co in! Almost like a timewarp back to the boom for 2 -3 months!


That is the distinct impression I get from asking around. Some construction professionals are busier than they ever have been. Others are doing nothing at all. In the midst of all of that, I haven't seen or heard a squeek from anybody regarding some kind of a larger master plan. (Including public service paid planners) I have a bit more to say on that matter, but need to sit down to properly gather it together into a blog entry maybe.

2003/04 is the last time I used a keyboard to publish anything thoughtful for wider consumption. (You can probably still find some of it back in the vaults of 1000+ entries at Archiseek) Back then I was still an angry, if somewhat older than average, university student. Even then I was too old to protest and beat a metal drum. I am definitely too old for doing it now. I have to wonder what has happened to the younger generation. Why aren't they getting organised, active and vocal, either as groups or individuals? ? ? It might give me a break and allow me to get on with the job of being an average bloke.

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Re: The Question of Land

Postby garethace » Fri Jul 03, 2009 11:09 pm

The real challenge though is to figure out what is going to be done for the 200,000 unemployed construction industry professionals and tradesmen?


As promised, I made my best suggestion here:

http://www.archiseek.com/content/showthread.php?t=7692

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Re: The Question of Land

Postby garethace » Thu Jul 09, 2009 10:49 pm

This is about:

Dragging the property business in Ireland out of the Celtic Tiger and into the modern age.

The modern airplane needs an onboard computer in order to fly. I think that property in Ireland has come to that stage. We need the government to fund a project in order to write the code necessary. We don't have a building bust in Ireland so much as a cronic shortfall in our ability to gain use out of the large buildings that we build. We haven't develop a sufficiently robust model for rental in either the commercial or residential sectors. I am not holding my breath for Daft, My Home or any of the developers to come up with these goods either. The trouble is, we have too much financial innovation happening at the wrong stage in the building process. All kinds of weird and wonderful things seem to happen at the point at which debt (read toxid debt) is created. Richard Douthwaite and Feasta can explain that a lot better than I can.

http://constructireland.ie/Vol-4-Issue-4/Articles/Economy/How-Ireland-might-avoid-bankruptcy-with-energy-innovation.html

The trouble is we do not have enough finanical innovation aimed at the point where the project is completed and needs to be fully used. In the early history of the Irish state a young fellow named Gordon Clarke wrote the first computer program in Ireland. His job was to cut out a lot of the administration needed in running the sugar beet plants in Ireland. So they invested in some large behemoth computers the size of a room. I saw a print out of what farmers got from this computer. It had to account for all kinds of things. Some farmers were obtaining finanical assistance from the sugar beet plant in order to sow the crop. They also obtained a quantity of molassas from the plant, which presumably was used as cattle feed. They also had to be paid for the beet crop they produced. The computer was needed to calculate and report all of that. Before the computer arrived it took rooms full of people with sheets of paper to do.

A large single tenant is often used in Ireland to disguise the fact that there is basically something wrong with the property management models we are using. When there is a large single tenant the problems seem to go away. But do they really? How sustainable is it for every developer to be producing large floor plates and then hoping to sign up the one tenant. We need robust computer models to calculate costs of floor plate area dynamically for enterprise that will scale up and down in size over the years. We need to provide finance to the business startup, as well as charge for the floor space use. Like we did with the sugar beet farmers so many years ago. Gordon later moved on to work at AerLingus. In those days, it was a really difficult job trying to calculate the value of rapidly depreciating airline tickets. It was another area in which computers found an early application in Ireland and in many countries throughout the world.

Ireland has the opportunity to become a world pioneer in the area of land valuation and property management. We could turn a big negative, into a big plus if we wanted to. We could sell our product to industry and governments all over the world. We need to think big enough. If we made this a project the state should organise we could tackle all kinds of problems. At the moment we have a couple of voluntary think tanks, a couple of university do-good-ers such as Constantin Gurdgiev looking around for a single PHd student in Dublin to do a thesis on calculating land values. This is hardly the scale of enterprise that is going to crack open this problem for Ireland or anyone else. We need the state to get involved and to think much more ambitious. We need to give all of those unemployed financial wizards and software engineers in Ireland something useful and sustainable to do with their lives. While they are still around to do anything.

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Re: The Question of Land

Postby missarchi » Thu Jul 09, 2009 11:57 pm

nothing will change...

However the day land + house prices are related to the social welfare and minimum wage wage and shown in the development plan for the state with guaranteed ownership after 5 years related to the population is the only time there will never be another recession.

Over too you...
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Re: The Question of Land

Postby garethace » Fri Jul 10, 2009 8:29 pm

However the day land + house prices are related to the social welfare and minimum wage wage and shown in the development plan for the state with guaranteed ownership after 5 years related to the population is the only time there will never be another recession.


Well that is a great assessment right there. When I started reading what Feasta were publishing and listening to some lectures they scheduled around the time the bust began, I started to learn things like the following. If one goes and gets a job, then the support you get on the housing side from the state is automatically taken away. I mean, how is that supposed to work? Planning officials, public servants and people in general a lot more knowledgeable than I am, are better qualified to understand these things and comment. From my limited overview of the situation, I can see a lot of problems that aught to be tackled. I believe that all political parties have some part to play in the process. I tend to veer too dangerously towards a revolution and a Stalinist approach myself. But I don't suppose piles of bodies will solve much either.

I only hoped to underline in the post above, the seriousness of the situation regarding the research into taxation and the land issue. We basically have no one working on the problem with any degree of skill and qualification. I don't know if Bolton Street managed to organise a single Phd student yet. I even doubt that. In fact, the Ireland of the post Famine years had engaged more people to deal with the land problem than today. We really do need to open a big new chapter in Ireland with regard to land and its taxation. Simply funding a PHd thesis or too might help, but it is like throwing a timble at a blazing fire.

I do believe that we saw in the Celtic Tiger years a glimpse at some of the real possibilities. The ready availability of so many large corporate tenants in Ireland compensated for the problems that are structural, that are embedded in the system. The drop in numbers of graduates and young people leaving the country certainly played a part. I do believe, we can regain conditions favourable to construction in Ireland, even in recession times, if we could look at the systemic problems and relieve them. My best instinct is that Ireland as country always under performed. We experience these very brief glimpses of hope once ever decade or two and then it passes.

It is like the sun that struggles to emerge from the cloud cover in the Irish sky. Economists from around the world come to Ireland rather like anthropologists or botanists go to rare habitats, to study some once in 20 year blooming in the desert. We are kind of a pit stop once every 20 years on the tour of world's economic oddities. The builders and developers seem to understand that better than most. They have adapted to the environment and have the same culture as nomads or bedouin travellers. A string of camels and some tents in which to interface with politicians. We need to look for solutions that enable us to sustain a level of activity expected of a first world country even in the slower part of the economic cycle. We need to find the oil that lies underneath the sand of the desert. That requires a lot more than one or two students. It requires many.

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Re: The Question of Land

Postby PVC King » Sat Jul 11, 2009 10:28 am

I am amazed by the above

Yes a culture emerged where virtually unlimited finance was available and it was possible to lobby the government for urban renewal tax breaks for projects that in the absence of same would never have been built; in many cases lie empty and should never have been built and in some other cases would have been built anyway as the gentrification frontier was moving in that specific direction anyway.

The real problem to my mind was not that some nomadic international parasite landed it was that large numbers of business people with no economic training became developers without any appreciation that property is linked to economic cycles like every other asset class.

A shopping centre is not just an investment product it is series of interlinked spaces which retailers will occupy to sell their goods and services. If you build too many shopping centres a retailers trade from one centre cannibalises trade from another centre and they will if they are smart assign their lease and if they are not will be unable to pay their creditors and enter liquidation. Similarly if you build too many houses buyers identify an oversupply and play one development off another. Ultimately lending should only take place where a presumtion can reasonably exist that the project fulfills a genuine market need or has the capacity to stand up to a 2 year recession by having one or more special advantages.

I do not however think that linking residential prices to social welfare or the minimum wage is appropriate for four reasons.

1. In a ten year cycle employment levels should average roughly 90 - 95% of the population therefore the majority of the population will want a product that can't be built for the construction cost alone taking the earnings to debt multiple that such a figurewould acheive.

2. People on the minimum wage or social welfare tend to receive help from the government with accomodation costs or live in pre 63 accomodation or social housing.

3. It would be financial suicide in the context of the land bank held by NAMA which requires a return to a normal functional market. There may however be an angle in NAMA retaining ownership of unoccupied schemes that have been completed and or are close to completion and setting up a body to ensure that income is raised on this stock until the stock overhang is removed. It could form the basis of creating a mature private rental sector based on secure annualised returns as is the case in say Germany but it cannot be at the cost of depriving the consumer of choice.

4. Much of the existing housing stock is in the wrong places; if sustainability and making transport infrastructure viable are to take place a lot of housing needs to built on existing rail lines. If you ensure that nothing gets built by removing both demand by having only low quality cheap housing built and profit which means banks won't lend then we are stuck with one off housing and SUVs as no doubt any threshold will exempt less than 3 houses.

What you will see is a period of limited constrruction whilst the overhang of existing units is removed from the market and then banks taking much more control in all stages of the development process to ensure that any developments they are lending against are of an appropriate quality and that the price matrix will not be undermined by over supply.
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Re: The Question of Land

Postby missarchi » Sat Jul 11, 2009 12:02 pm

PVC King wrote:I do not however think that linking residential prices to social welfare or the minimum wage is appropriate for four reasons.


There are 5 classes/zoning you would fit in the unlimited one.;) ******
Is a billion a m sq. cheap for you?
Development is rewarded for being close to transport.
Its impossible to build away from transport/services.
Every one has a home after 5 years and can get on with life/family...
These zoning's are all after tax so if you increase tax you have to change the zoning that day. If the margin of error is out by more than 10% your out of government your pension becomes a debt which is passed on from one generation to the next much like the proposed education system it could be applied to the teachers.

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 PVC King » Sat Jul 11, 2009 1:53 pm

I have no idea what you are trying to say but wonder why you are factoring in a metro that will never be built or the term major to cycle routes which appear to be virtually non-existant.
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Re: The Question of Land

Postby garethace » Sat Jul 11, 2009 5:35 pm

2. People on the minimum wage or social welfare tend to receive help from the government with accomodation costs or live in pre 63 accomodation or social housing.


There are players outside of Ireland who want to enter the Irish market and change that common perception.

http://www.corcoranjennison.com/createcomms.html

Since 1971, Joe Corcoran and Gary Jennison have developed property in excess of $2.5 billion. They also pioneered the development and management of mixed-income housing - a feat they consider their most rewarding accomplishment.

Today, with Marty Jones as President, Corcoran Jennison has expanded its scope and portfolio to include properties in 15 states, and management of over 24,000 residential units, with 2,000 employees. Our story is one of people, partnerships, communities and success.


To be honest, the country isn't ready for it.

All the Part Five of the planning act did in Ireland was to introduce something to allow planners to feel noble and superior. Every time we want to do something in Ireland, rather than do it, we put a band aid on the thing. The Part V of the act allowed planners to claim they had fixed it, when they hadn't fixed it. We are lazy arse holes with rubbish organizational skills and too much money circulating around in the public service. Let's be honest about that for a change. The housing departments in local authorities do reviews to 'investigate' other possible models for housing rent etc. But they don't want to change a thing. They are like the developers. They like things the way they are. Running a housing departments in a local authority pays out a good wage and the public service isn't going to see that nest egg compromised for anything. Much less a private company who really knows how to get things done. We made a mistake. We privatised our telecommuications. What we should have done was privatise the housing departments of local authorities and encourage international players to get involved in meeting that demand.

In the heal of the hunt, all the Part V succeeded in doing, was to create bonaza time for planning consultants selling advice. The Celtic Tiger breed of developer was unsophisticated and having pocket fulls of bank credit, were easy targets for those selling Part V advice. That is, the legislation had the unintended consequence, that it removed another piece of authority from well trained design professionals and gave it to guys who had no design credentials who could game the system. The RIAI were too distracted with things like design awards. They were too busy giving rubber medals to each another. They were too stupid to realize they wouldn't have an arse left in their trousers, when the so-called Part V consultants had run off with their bread and butter.

There is nothing more attractive to an Irish developer than the prospect of being able to defeat some kind of legislation. That commands the ultimate bragging rights. He or she will invest more energy and waste more time doing that than doing what they should be doing. On the other side of the fence, the planners themselves turn into police men and women, guardians of the public good. They turned their career description into that of chasing mean old nasty developers. It makes them feel important to be mixing it with the heavy weights, something to brag about at coffee breaks. What you get is this ridiculous 'Tom and Gerry' exercise with no one doing the job they are supposed to be doing. If we had not engaged in that bullshit with Part V, we might have managed to develop a residential rental model by now. All we have are lots of stories about how I got the best of Mr. Developer to make him build S&A units. Or how I got the best of the local authority and didn't build them.

I mean, I have personally seen people work over two years on a project, simply trying to figure out a way to build it without giving S&A units away. (I can only assume the same was true within the public sector) We need to get away from that bullshit and try to get back some value for our money in Ireland. Otherwise the International Monetary Fund is going to own us. We will be like Moldova trying to fix the pot holes. The S&A units that the local authorities have, they don't even know what to do with. (Remember that point I made about Eircom privatisation) The local authority defined the problem as, how do we get S&A units out of the mean old nasty developers. The plan didn't extend as far as, what the hell do we do with them, when we finally have them.

S&A units are equally as complete, un-occupied and toxic as everything else overhanging the market in the private sector. The local authorities did as little to develop an attractive rental model as the private sector did. In fact, they did everything in their power to hold onto their miserable little 'housing departments' to keep a few public sector jobs in the local authorities. We haven't got a building bust in Ireland. What we have is a chronic inability to make use of whatever we do build. We don't have one single PHd student in the entire country working on this problem. That is why I decided to start the thread about Land Values. To do some preliminary exploration the issue. What are the issues that a proper study might tackle?

In most cases the S&A units are worse, because they were built by mickey mouse consultant architects who win design awards and don't know how to build things at average market costs. Architects have the bare faced cheek to talk about 'quality' of public sector building being better than in the private. It depends on how you define 'quality', and I always thought working for developers, that achieving acceptable standards on budget was a good thing. But when I compare my product, to what mickey mouse architects built in the public sector I am shocked and speechless. They used exotic hardwoods like it was wall paper. (I will refrain from naming any projects or consultants)

But if that is how you want to define 'quality' then go ahead and say public sector buildings are a higher quality. But don't try to compare what mickey mouse is doing in mickey mouse public housing schemes, with what the private sector was doing in the real world. Architects use all kinds of crap about 'design' and 'space' to conceal the fact that they haven't a clue about building or costs. They then try to look so innocent when they walk up the podium steps to receive an award for all the exotic hardwood they left to rot stuck on the outside of publically funded buildings. So there is something incestuous going on between consultant architects and local authority housing departments who want to keep things as they are. George Lee only scratched at the surface when he said, in the Celtic Tiger everyone was compromised. Everyone was being paid in some shape or form, not to raise any hassle.

http://www.rte.ie/news/2009/0318/howweblewtheboom.html

The real problem to my mind was not that some nomadic international parasite landed it was that large numbers of business people with no economic training became developers without any appreciation that property is linked to economic cycles like every other asset class.


Those are the exact kind of 'made up' developers that studied the part V during the Celtic Tiger and now sit at bars and 'Har-har' about their great achievements. Not to mention the fact, that many of those gimps only took up valuable fees and time which could have been channeled to trained professionals like consultant architects. It is hilarious in Ireland, we go through the pointless exercise each year of graduating more trained professionals. Then another bunch of glorified rebar engineers go off and build what needs to be built. That is all that happened with the Metro transportation planning. The architects who should have been involved, were too busy running micky mouse architectural practices and going to meaningless awards ceremonies. (Running a boutique that designs glass boxes for peoples' rear gardens always comes before real sustainable planning) The same with the National Spatial Strategy, the rebar engineers had their day again. Architects deserve what they get for being a bunch of miserable, lousy pansies.

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Re: The Question of Land

Postby garethace » Sat Jul 11, 2009 10:33 pm

Rightly or wrongly, the average paddy does not give a damn about the present construction sector. To him it is synonymous with in-your-face builders/developers/estate agents and is glad to see them get their comeuppance. He wants, and believes that it will come, a construction industry that provides a quality product at a fair price. That is why Paddy is not buying.


I was reading that paragraphy again by KerryBog and it struck me, that the housing departments of the local authorities really do have to be thrown in with the developer, builders and estate agents. They are every bit as much a part of the present problem as anyone else. People tend to draw lines between public and private when in fact one can substantially affect the other. What we need is a good rental model, that will serve both the housing assisted and housing un-assistanted occupants together in the same place. If that means that residential communities require their own security, then so be it.

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Re: The Question of Land

Postby garethace » Sun Jul 12, 2009 11:23 pm

After receiving the securitised income he went on a share-buying spree, investing in everything from sugar to ferries. Millions were invested in Greencore, Irish Continental Group, McInerney and Aer Lingus, stocks that had little in common other than the fact that they had land banks, and land was what Carroll understood.


I found the quote in this Sunday Tribune article. It displays the fundamental mistake we all made. LC didn't understand land, what he understood was construction management really well. Better than anyone ever has done in this country and perhaps many others. It was when LC convinced himself he knew about land, that he made the biggest mistake of his career. He wasn't helped by the second and third class suck arses he had hanging around him either.

http://www.tribune.ie/business/article/2009/jun/28/where-did-it-all-go-wrong-for-carroll/

I remember it was impossible to hold a Danninger site meeting during the stocks and shares buying spree. All our sub-contractors wanted to do was to crack jokes about 'planes, trains and automobiles'. Ireland, having gone through a politically and financially orchestrated land value bonaza, had builders who weren't doing their real jobs anymore. Here were a bunch of chippies, electricians and foremen swimming way outside of their depth. Danninger was a company that understood how to do something well, construction management. But it stopped doing what it set out to do. That is the most shameful recollection I have of these times. I hope it will serve as an indication to those who are making decisions in terms of where the country goes from here. I was a young apprentice in the property development game and I felt Danninger were the best mentors I could have to learn from. What was really lost in the Celtic Tiger bust? It wasn't all of that Celtic Tiger monopoly money and seudo-millions that Bertie created out of thin air. It was the prospects, the hopes and dreams of a nation.

It reminds me of something that Michael Dell wrote in his autobiographical novel, Direct from Dell. I had come 'direct from Dell' computer factory myself in Limerick city to work at Danninger. Michael Dell wrote of the fact, that when he was making thousands of dollars he knew how to run that business. The growth of his empire was rapid however, and soon it was earning millions, not thousands. Michael Dell didn't know how to run that business. But he took the brave step and hired a couple of million dollar class managers to run his company. But soon his company had out grown even that bracket and was a billion dollar world wide company. So again, Michael Dell, still a director of the company he founded, had to go out and pursue billion dollar managers to run his billion dollar company.

One could ask oneself, reading this article how does someone lose a billion? It is very simple really. The first week I worked in Danninger, I myself looked around and said to myself. There is no Michael Dell in this place. These guys once knew what to do with a couple of hundred thousand, but they are way out of their depth now. The funny thing is, I didn't imagine it would un-ravel as fast as it did. I was counting on getting a couple of years employment out of the situation, while I learned the trade so to speak. But the speed at which you can lose money is still astonishing to me. This is the damage done by land in Ireland. Land value tax needs to come in. That is the painful decision this country will have to make sooner or later. LC has had to fire all of his employees, including some who had been with him since the beginning. LC was too ashamed to give the final hand shake. Where does that leave us now? We have squandered the opportunity to build something sustainable in the private and public sectors equally. Everyone has to take their fair share of responsibility and move forward somehow.

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Re: The Question of Land

Postby garethace » Tue Jul 14, 2009 9:41 pm

What you will see is a period of limited construction whilst the overhang of existing units is removed from the market and then banks taking much more control in all stages of the development process to ensure that any developments they are lending against are of an appropriate quality and that the price matrix will not be undermined by over supply.


Since NAMA is a radical new departure, even by global comparison according to Trinity economic professor Pat Honohan. I am going to propose something quite radical here myself. I suggest that we have architects working for banks in the future. Why?

Because the more I try to understand the future product Ireland is trying to package. The more I look at what the market is actually buying - green future proofing in an attractive package at an affordable cost. The more I look at the various components required for sustainable development of anything. The more I am convinced that architects will have to be working in banking institutions. Bankers themselves can't do this right. They make a complete dog's dinner of it.

But you do need good bankers on your side. Danninger's case is an example of that, where they didn't have a banker on their side when they struck a deal, in which they lost the farm, quite literally.

Architects are the only guys who can be trained properly in learning to identify what is sustainable development, and therefore saleable in the market in 2009/10 and what is not. Especially with regard to NAMA. I outline that in my rescue plan for Danninger here:

http://www.archiseek.com/content/showthread.php?t=7713

You only have to look at the example of Danninger and let that be a very stern lesson to all Irish companies out there. I met many guys after the company broke up, who had never been on social welfare in their lifes. They were men in their mature mid life years too and it really was a strange new world they found themselves in.



You know, I never thought I would be linking to a Ruairi Quinn blog entry, but he commented here on a Will Hutton article which is worth reading:

http://www.ruairiquinn.ie/?p=18

Ruairi Quinn who is an architect and previous minister for finance would be an ideal candidate to provide the 'design and sustainable urban planning' perspective to the new NAMA organisation.

According to Ruairi Quinn:

We need a fresh start and a new framework of regulation, transparancy and accountability. Banks must return to being service providers to our economy and not speculative players in their own right.


Liam Carroll's story is a text book case, for why banking and property should be separated. At least in the way they did in Ireland. The banks encouraged Carroll to play on the open market. Liam Carroll went into that market trying to sell a product that was ill thought out and perhaps daft anyway.

(It reminds me of the scene in the Godfather, where he has to collect his weapon from the cistern at the rear of the restaurant, only there is nothing there . . . or something like that, if memory of the movie serves me correct)

In any case, the marketplace saw through the crap and took all his money. The people who organised the securization of his rental income, knew what would happen further down the line when the markets rejected him. It was the lowest down tricky trick on an honest building company, I will ever see in my life time. Danninger were exactly the kinds of over confidence fools who would fall for it anyway.

The banks were more than happy to make what fees they could and more besides. Now they are fighting over what is left of the carcass. (Kids should look away now) In basic terms, Carroll was reeled in, beached and gutted from top to bottom.

But that is nothing personal, as far as market capitalism goes. Effectively, as the Celtic Tiger roared louder, good building companies were unable to do their normal jobs. The bankers themselves became the designers on the drawing board, which was wrong. Our system in Ireland doesn't have any fail safe for that. We need to reverse the process, and I am confident, guys like Ruairi Quinn know how to do that.


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Re: The Question of Land

Postby missarchi » Wed Jul 15, 2009 10:43 pm

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Re: The Question of Land

Postby garethace » Thu Jul 16, 2009 6:14 am

missarchi wrote:The (Illuminati) Formula

http://www.youtube.com/watch?v=CM4jrODRjJ4


Thanks.

The part I did like: "No one can accept that, even to themselves".

That is exactly the kind of idea I had in mind.

I composed the couple of documents about Danninger, so that they might be of assistance to some other Irish companies who are caught in a similar situation.

Or worse, contemplating getting stuck in a similar situation with their bank.

http://www.archiseek.com/content/showthread.php?t=7713

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Re: The Question of Land

Postby garethace » Tue Jul 28, 2009 9:31 pm

Absolutely excellent blog site.

"If your house is on the market for a long period of time - i.e, 8 to 12 weeks - psychologically there is negativity going to be thrown at it. Potential buyers - even though they haven't viewed the property - may say 'God, there's something wrong with that house because the board's been up such a long time'."


http://quotesfromthebubble.blogspot.com/2009/07/liz-okane-property-tv-show-presenter.html

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Re: The Question of Land

Postby garethace » Tue Jul 28, 2009 9:54 pm

"One can only surmise what the average millionaire will be able to buy in Dublin in another nine years.

A pokey one-bed apartment in the outer suburbs? Or maybe a townhouse on a new development bought under the local authority's affordable housing scheme? Will the semi-d become the preserve of the multimillionaire while only the super rich will afford the luxury of living detached?"


By Edel Morgan

http://quotesfromthebubble.blogspot.com/search/label/Edel%20Morgan

Brian O' Hanlon
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Re: The Question of Land

Postby KerryBog2 » Wed Jul 29, 2009 10:51 pm

garethace wrote:.... I suggest that we have architects working for banks in the future. Why?

Because the more I try to understand the future product Ireland is trying to package. The more I look at what the market is actually buying - green future proofing in an attractive package at an affordable cost. The more I look at the various components required for sustainable development of anything. The more I am convinced that architects will have to be working in banking institutions. Bankers themselves can't do this right. They make a complete dog's dinner of it. ...................
Architects are the only guys who can be trained properly in learning to identify what is sustainable development, and therefore saleable in the market in 2009/10 and what is not. ............


Brian,
The foregoing is not accurate and the more you write it seems to me the more you are clutching at straws.

When commenting on the property market economists from financial institutions and estate agents carry an inherent “health warning.” In the US it’s called Snake oil.

In every bank loan approval letter, a bank reserves the right to appoint an architect to acquaint itself with the progress of a development. When I worked as a young banker- many years ago, financing the likes of Brennan & McGowan. Gallagher, a young Paddy Kelly, a young Frank O’Kane, et al.,- I called on this right many times and did site visits with my appointed architect. Simplistically, bankers do money, builders do construction and architects do technical stuff. A banker’s job is to assess risk, make a decision and if it’s “yes” then lend, follow through with support and always with an eye on repayment. (Present-day “bankers” forgot about the latter.) A modicum of understanding of construction pricing, economics, market demand and basic cop was what was required. The architect was an outside professional called in to offer accurate technical advice on aspects or stages of a development, to make sure wool and eyes did not meet. The viability of the project was for the lender to judge, with input from personal experience, judgement and outside advice. If an architect were directly on a bank’s payroll he/she would be in an invidious position both internally and externally. It could not and never would work.

When, in 2000, an apartment in Ringsend was costing the same as a larger, better designed one in the Upper East Side of NYC I had serious questions and doubts. Singapore, the original for our Celtic Tiger, was emerging from a property crash and negative equity was rampant. Those signs were ignored here because lenders had targets, architects wanted fee income, developers/builders saw ££££ signs and politicians wanted tax income to spend and get re-elected.
Nobody forced Carroll or buyers of dodgy apartments to borrow. It was their own fault.
Greed + ignorance = loss of shirt.
Rs
K.
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Re: The Question of Land

Postby garethace » Thu Jul 30, 2009 10:47 am

Kerrybog,

Thanks once again for bringing some degree of logic and common sense back into our discussion.

The architect was an outside professional called in to offer accurate technical advice on aspects or stages of a development, to make sure wool and eyes did not meet. The viability of the project was for the lender to judge, with input from personal experience, judgement and outside advice. If an architect were directly on a bank’s payroll he/she would be in an invidious position both internally and externally. It could not and never would work.



Lets us bear in mind first that architects in Ireland have lost enormous amounts of ground that was traditionally theirs to other land and building professionals that have risen in their sophistication. Architecture has a very challenging task now to recover some of that lost ground, before it even begins to win back any new ground.

http://designcomment.blogspot.com/2009/07/betting-against-market.html

But as an example, in terms of illustrating what 'new ground' for the architectural profession may look like . . . .

Rather than reading blog entries about architects and their polo neck shirts,

http://www.architecturefoundation.ie/2009/01/16/some-dark-thoughts-for-these-bleak-times-by-sean-o-laoire/

I long for a day when I can read a blog entry by RIAI president Sean O'Laoire, which describes what he learned in his workshop with Frank Duffy of DEGW consultants in the UK. In the light of the McCarthy report, NAMA and all of the grey market office space overhanging the market in Dublin and other Irish cities now, we need architects to get creative and get involved. We need architects to develop skills in areas they never knew existed before. One book reference I would recommend any architect to read today is Douglas McGregor's 1960s classic, The Human Side of Enterprise.

Here is a little interpretive piece I found with a google search:

http://www.leadershipnow.com/leadershop/1462-5excerpt.html

Warren Bennis's name is attached with the piece, so it has to be worth reading.

Ireland is a small and agile nation with a trained and intelligent workforce who need to be put to work now. Otherwise, years will pass by, some will leave the country and many others will simply go into a process of slow but certain stagnation. Many opportunities for Ireland will be wasted away in all the messing around. It might appear that Frank Duffy's involvement in training up RIAI members would represent a conflict against its own interests. On the other hand, Ireland is such a small market that perhaps a successful collaboration with Irish architects in re-focussing and improving their perception of business management would be the ultimate advertisement for DEGW.

I wrote a few words about the McCarthy report and DEGW at this blog entry:

http://designcomment.blogspot.com/2009/07/mccarthy-report.html

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