http://ghostestates.com
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Very lazy effort; including offices in city centre locations displays complete absence of an understanding of what a ghost estate is.
A useful definition would be any estate with an occupancy level of less than 50% and more than 30kms from any settlement with a population exceeding 50,000 people. I.e. half the BoSI loan book!!
A simpler definition is that a ghost estate is an unfinished residential development whose completion is not economically viable. (cost of completion exceeds likely profit from sale).
I am puzzled by this whole notion of the ‘ghost estate’; FT’s definition as shown above is a useful working one, but what does ‘economically viable’ mean, especially in present circumstances? There is effectively no market, so arguably everything has a nil or very low exchange value. Therefore, these unsold houses represent a ‘loss’, but a reasonable return in present (or able to be foreseen) circumstances might well be simply the costs of land + construction (i.e. no profit, or very little).
The idea that ‘nobody’ wants these houses seems to me bizarre: is there no public housing need? Is there no need for institutional uses? Is there no need for ‘affordable’ housing? It would be as well to complete some of these schemes for a variety of housing needs over the next few years.
Is the glass half-empty or half-full? They would need to be bought by the state or its agencies in the first instance (rather than pouring money down the big hole of the banks), but there is an opportunity to adopt a more ‘strategic’ housing approach on the back of an economic downturn. It is only if you apply a failed commercial model to these ‘estates’ (telling word) that there is any ghost-like quality about them.There are two issues in this one half finished estates where existing residents are essentially not receiving the services they were led to believe would be provided when buying in; i’ll return to this and then there is what the website alludes to and what Frank tries to outline above i.e. the future economic viability of half or almost complete estates; I am concerned on this as it seems to me that at some future point in the cycle many of these estates will have a commercial viability; you have 250,000 unemployed construction workers getting the most generous benefits in the anglo saxon World and no doubt going out of their minds with boredom; this could be a very good opportunity to solve both benefit rates which need to be revised sharply lower by cutting unemployment benefit for those who refuse to work for €100p/w in excess of what they are getting now; much of this could be paid for by taxes on building materials, professional fees etc.
The second issue are half completed estates and this problem is nothing new; the UK introduced comprehensive residential tenant protections in the late 1980’s that gives tenants real teeth as to how developments are managed post completion. In the current vacuum where many of the developers are concentrating on other things this sector needs to be regulated asap; management companies need to be formed and if necessary a regulator with statutory powers needs to be able to take control of common areas and run them as normal block / estate management practice dictates including recovery of costs through estate charges. Needless to say this would create yet more employment with the house/flatholders paying through service charges.
However we need to move away from the ‘nothing will ever be viable again’ attitude; doing appraisals for completion of half built estates with low rents should be undertaken and where unviable they should be torn down and where viable, likely to be the majority they should be completed to ensure that supply side constraints do not result in a once in a generation opportunity to readjust living costs to more realisitc levels is missed. In time the properties could be sold to coincide with bond repayments; possibly to the occupiers.
The map is a very slipshod piece of homework. I cannot believe that there is only one ghost estate in the entire county of Kerry and not one in Donegal
@PVC King wrote:
………………….it seems to me that at some future point in the cycle many of these estates will have a commercial viability]
Do not confuse commercial viability and value. Looking at the estates around me in S. Kerry, most cannot ever be economically viable, therefore the value could be negative – i.e a liability due to finishing, on-going maintenance, or demolition, clean-up and landscaping costs.
As for the unemployment figures, I’ve said it many times before but it does not seem to have sunk in…. we as a country do not need 250k workers in the construction sector. Nor do I see the point in putting a tax on building materials. That presupposes that there would be funds available to build, that the finished units would be sold; personally, I cannot see a need for more empty shells to be built.
@PVC King wrote:
The second issue are half completed estates and this problem is nothing new]
This misses the point… most developers (all?) are bankrupt (that is why they are concentrating on other things!) and it would be futile to bring in legislation to get them to maintain common areas or services. Nor could it be applied retrospectively. Management companies already have the powers to chase owners for unpaid service fees and can obtain a lien/judgement on a property until they are discharged – not much point in that when not only the owner but also the holder of the first charge is in negative equity.
@PVC King wrote:
where unviable they should be torn down and where viable, likely to be the majority they should be completed
The majority is very much more likely to be totally unviable. The unfinished units in the estates that I know cannot ever be viably completed – even those completed units in prime tourist areas along the Ring of Kerry were empty most of the summer, Why bother to rent a holiday house in a roadside cul-de-sac when you can get one attached to a hotel that also offers great facilities?? Why would anybody bother to buy a holiday home when there is a strong likelyhood that it will devalue and will cost you 2,500 minimum p.a. for taxes, light. heat. insurance and maintenance?
Kb2.
The map is a very slipshod piece of homework. I cannot believe that there is only one ghost estate in the entire county of Kerry and not one in Donegal
BoSI’s favourite county Donegal!!!
Do not confuse commercial viability and value. Looking at the estates around me in S. Kerry, most cannot ever be economically viable, therefore the value could be negative – i.e a liability due to finishing, on-going maintenance, or demolition, clean-up and landscaping costs.
As for the unemployment figures, I’ve said it many times before but it does not seem to have sunk in…. we as a country do not need 250k workers in the construction sector. Nor do I see the point in putting a tax on building materials. That presupposes that there would be funds available to build, that the finished units would be sold; personally, I cannot see a need for more empty shells to be built.
I did caveat what I said to 30kms of a settlement of 50,000 pop which does give the suggestion considerably more credibility; if there are 40 half finished houses half way between Listowel and Tralee then give me the keys; I’ll gladly demolish them.
However for good or bad Ireland embraces the social support model and given that the model is supportive of the family it makes no sense to have people sitting around collecting very generous benefits whilst the tax base dwindles. I see a supply side plus in utilising these people to contribute to the recovery.
On viability the point of taking into account what was paid for the land has long since passed; I would set one test:
If value can be added where the rental value of the units is calculated 20% below where rents currently are and if the value taking a 5% yield is greater than the costs of the materials, labour and professional fees then the properties should be completed; if not send me the keys of the bulldozer.
This misses the point… most developers (all?) are bankrupt (that is why they are concentrating on other things!) and it would be futile to bring in legislation to get them to maintain common areas or services. Nor could it be applied retrospectively. Management companies already have the powers to chase owners for unpaid service fees and can obtain a lien/judgement on a property until they are discharged – not much point in that when not only the owner but also the holder of the first charge is in negative equity.
Then an ammendment to the legislation should be made to give powers to a regulator to take administrative powers over such properties; the administrations laws in the UK are interesting; if a tenant (which the developer is of the estate) occupies a property then they must pay the rents and charges; this extends to administrators. E.g. buy to let landlord collapses and bank appoints administrator; then if property is tenanted then the administrator must pay the outgoings [Goldacre v Nortel Networks 2009]
The majority is very much more likely to be totally unviable. The unfinished units in the estates that I know cannot ever be viably completed – even those completed units in prime tourist areas along the Ring of Kerry were empty most of the summer, Why bother to rent a holiday house in a roadside cul-de-sac when you can get one attached to a hotel that also offers great facilities?? Why would anybody bother to buy a holiday home when there is a strong likelyhood that it will devalue and will cost you 2,500 minimum p.a. for taxes, light. heat. insurance and maintenance?
People will who can afford to take a long view; prices do not need to bear any great relation to boom prices they just need to exceed the costs of doing the work to complete them. Am I predicting a bull run for Irish property? No not unless the Fed copy the 1970’s model of Fiat money, ceate an inflation bubble and wash the debt out of the system doing serious damage to the prudent who hold cash
One other thing I would query is the inclusion of completed projects that are empty because they are overpriced. Down here, the Elysian and the estate in Shanakiel would easily sell, if they were priced to the market. But there is still an attempt to get 2007 prices for them. Knock 40% off and they would be occupied in no time.
@johnglas wrote:
I am puzzled by this whole notion of the ‘ghost estate’; FT’s definition as shown above is a useful working one, but what does ‘economically viable’ mean, especially in present circumstances?
I mean that the cost of completion may exceed the sale value of the properties even if we write off the costs to date.
For example, a liquidator acquires a half finished estate at no cost to him. He calculates that it will cost €2m to complete the development including roads, service connections etc. Yet the completed houses will only be worth €1m. Demolition and cleanup costs 500K. Conclusion: demolish.
Half finished buildings present a social & health hazard.
Completed developments can always be sold at no reserve auctions even if they are in poor locations. Half completed developments in good locations (near jobs) will be completed.
FT: thanks for that; I had more or less concluded that that was what you meant.
But the point remains: supposing it does cost eur 2m to complete a scheme and that this cost is borne by the govt, LA or some other housing body, which in turn then gets title to the land and houses. It has acquired n houses for its purposes, the developer has got the market value x2 and you have a completed scheme to satisfy the existing residents. That looks like a good deal to me.
Not all schemes will be suitable, but the pre-existing market model (i.e. houses being sold at grotesquely inflated prices) needs to be abandoned; at best the builder can expect to recoup costs, the owner-occupiers may have to ‘put up with’ social-housing occupants, but more socially-useful housing distribution will have been achieved and in the longer run a more realistic market may re-emerge. Or you can stick with the current model and stew, while stuffing the pockets of the wide-boy spiv banks.JG; I always get a laugh out of your rhetoric!! Always a tory or banker at end of your jibes!!
The unfortunate reality is that there are no developers in this process; if any of these projects are taken on it will be the equivelent of LPA receivers appointed by the development land team at Nama who do the instructing. I agree that FT sums it up well; start at nil cost and if there is a return then build; if not demolish; what is a dramatically worse than having social housing occupiers added to the population of a private estate are middle class teenagers away from parental eyes with a few litres of white lightening in their gut.
You would have to say whilst inquiries must be held into how the goverment and regulators missed FF i.e Fingers and Fitzy running up debts no-one could afford; it doesn’t address the here and now for many people mortaged up to their eyeballs, taxed to the hilt and in half built housing estates which are dangerous and with no structure of control or system to install same.
Does anyone know of companies that recycle the components of half built houses?
@Frank Taylor wrote:
Does anyone know of companies that recycle the components of half built houses?
There is an estate of half-finished ad finished houses near Bantry that benefitted from that ‘organization’. Those houses no longer have sanitary fittings, internal doors or even stairs. 😉
K.@johnglas wrote:
FT: thanks for that; I had more or less concluded that that was what you meant.
But the point remains: supposing it does cost eur 2m to complete a scheme and that this cost is borne by the govt, LA or some other housing body, which in turn then gets title to the land and houses. It has acquired n houses for its purposes, the developer has got the market value x2 and you have a completed scheme to satisfy the existing residents. That looks like a good deal to me.
Not all schemes will be suitable, but the pre-existing market model (i.e. houses being sold at grotesquely inflated prices) needs to be abandoned; at best the builder can expect to recoup costs, the owner-occupiers may have to ‘put up with’ social-housing occupants, but more socially-useful housing distribution will have been achieved and in the longer run a more realistic market may re-emerge. Or you can stick with the current model and stew, while stuffing the pockets of the wide-boy spiv banks.Your math does not stack up. The reason most of these estates are ghosts today is because they never can be viable – they were condemned to failure from the time the developer overpaid for the overpriced land; that situation was worsened by excessive input costs (fittings/labour) that were too high, etc., etc. The builders NEVER can recoup their costs. A white elephant remains a white elephant even if it painted grey.
The majority of ghost estates will remain ghosts until they are knocked because they are the wrong type of housing built in the wrong place. There is no point in housing people in an area where there is neither work nor public transport nor schools. The social unrest that would be caused would also be considerable. Way way back in the early debate with Brian O’Hanlon/Garethace I wrote somewhere that we would have a property ‘foam’ – i.e. that Ireland would have lots of big bubble properties and in between there would be lots of small bubble properties. Paying stupid money like 10 million for a small detached house in Dalkey or Howth creates a big bubble but in between there are houses that are only small bubbles because the location/size/price ratio is viable. Some of the recent apartment sales we have seen are examples of the latter, where realistic ‘bang for buck’ prices were available.
Current inactivity by the government, opposition and enforcement agencies is prolonging the difficulties and hindering recovery. The lack of action by the ODCE is in my mind now bordering on ineptitude. The same comment goes for the various institutes – bankers, accountants, etc. Until someone appears in court/is disbarred the blame game will continue its useless interminable path…….
Depressing.
K.PVC K: I may lampoon the tories or the bankers (not exactly difficult), but you have a morbid fear of your fellow citizens. That’s a problem.
My maths may very well not add up; neither did anyone else’s, apparently.you have a morbid fear of your fellow citizens
I had an e-mail exchange with a senior opposition figure in June 2007 who was very hurt by the result in that election; lets not lose sight of the fact that our fellow citizens voted in this government. You could argue that the writing was on the wall in early 2007, the credit markets certainly knew it but as a nation we were urged to binge some more, this wouldn’t happen in Sweden; in the UK you voted for more lets deregulate the markets Blair in 2005; in Scotland you;ll probably vote for more Salmon next year. I have no doubt the Irish electorate won’t make the same mistake for generations if ever; you couldn’t make up the way Ireland Inc behaved from 2005 to the present time. Really couldn’t make it up.
Current inactivity by the government, opposition and enforcement agencies is prolonging the difficulties and hindering recovery. The lack of action by the ODCE is in my mind now bordering on ineptitude
There is no legal mechanism of dealing with the viable estates in a coherent fashion. Banks who funded developers must play ball on this or they will end up with people walking away and resettling in Oz; there is a big story on foreclosures coming through in the US at the moment; a coherent strategy to deal with this sector is vital.
One other thing I would query is the inclusion of completed projects that are empty because they are overpriced. Down here, the Elysian and the estate in Shanakiel would easily sell, if they were priced to the market. But there is still an attempt to get 2007 prices for them. Knock 40% off and they would be occupied in no time.
I am amazed evertime one goes on daft.ie there are clearly motivated sellers and stock is moving; but you see people looking for prices that would have been full in 2006. The time value of money can never be underestimated.
@johnglas wrote:
PVC K: I may lampoon the tories or the bankers (not exactly difficult), but you have a morbid fear of your fellow citizens. That’s a problem.
My maths may very well not add up; neither did anyone else’s, apparently.Morbid fear of my fellow citizens? 😮
Possibly. However, my neighbours at my town residence are bankers/stockbrokers/failed speculators so I believe I am right to fear them. At my ‘country estate’ I am surrounded by NAMA projects or those dead destined for foreign bank foreclosure……….. The thoughts of importing long-unemployed ‘townies’ from ‘difficult’ urban housing estates to a small rural community that has for a long time struggled to survive – and has no broadband, transport, infrastructure (efficient water/sewage) or industry is an acknowledged recipe for disaster. No wonder I periodically find life depressing.As for math, sadly mine did add up, which made my (Irish) professional life difficult in the extreme.
Back in August 2006 – look at the second post , my post #2 here https://archiseek.com/content/showthread.php?p=55777#post55777
Six months later I was even more negative. , my post #43 https://archiseek.com/content/showthread.php?p=82557#post82557The little solace I might now draw from knowing I was right does not parsnips butter. I have too much time, but thankfully I have the ponies and the weather is getting colder, so the snipe, duck and woodcock will be arriving and the bog will be tramped with the gun. That will cheer me up.:):)
K.@PVC King wrote:
I had an e-mail exchange with a senior opposition figure in June 2007 who was very hurt by the result in that election; lets not lose sight of the fact that our fellow citizens voted in this government. You could argue that the writing was on the wall in early 2007, the credit markets certainly knew it but as a nation we were urged to binge some more, this wouldn’t happen in Sweden; in the UK you voted for more lets deregulate the markets Blair in 2005; in Scotland you;ll probably vote for more Salmon next year. I have no doubt the Irish electorate won’t make the same mistake for generations if ever; you couldn’t make up the way Ireland Inc behaved from 2005 to the present time. Really couldn’t make it up.
There is no legal mechanism of dealing with the viable estates in a coherent fashion. Banks who funded developers must play ball on this or they will end up with people walking away and resettling in Oz; there is a big story on foreclosures coming through in the US at the moment; a coherent strategy to deal with this sector is vital.
I am amazed evertime one goes on daft.ie there are clearly motivated sellers and stock is moving; but you see people looking for prices that would have been full in 2006. The time value of money can never be underestimated.
That really does not address the issue. No matter what happens, people will walk – many already have walked – and are settled in Oz. The bankers do not have the cojones to deal with anyone, they are too busy running for cover and protecting their own asses.
Developers should be sued, NOW and the boot put in. The ODCE – well, I have no idea what that office is doing. (‘We are building a case,’ blah,blah.) Fraud is well nigh impossible to prove, so get real, just fire and disqualify bank directors and senior managers for incompetence. How many have soft or non-performing loans, or loans that are in breach of covenants? When will that story break??
Elsewhere, no disciplinary hearings have been brought at any of the accountancy institutes, and the bankers are leaving with huge severance packages . Nobody at NAMA appears to be applying to the courts to have property transfers to spouses set aside. (Whatever happened to fraudulent preference ??) In fairness to RIBA it did a number on the architect who in April last was found guilty of trying to kill his wife and by July he had been struck off by them. What has Ireland done? to anyone?and we have a desire to be a financial services centre?? hahahah:rolleyes:
PVC, there is no point in farting around with a strategy on foreclosure, I worked in banking years ago and saw how schemes, etc., could be manipulated. Too depressing to go on, I’m going for a pint.
K.PVC K: Thanks for taking the time to respond; none of my comments (however asinine) are intended personally. On the voting patterns of populations… your guess is as good as mine. On the Scottish front, I seriously doubt that we will re-elect the SNP (to my considerable disappointment); it’ll be back to old (New) Labour, probably. Not only should FF not be re-elected in Ireland, they should be sent to the outer darkness for the duration.
By the way, I am no more in favour of living beside low-lifes than you are, but the concept of ‘social housing’ needs to be rehabilitated since a great many more people are likely to have to avail of it for the foreseeable future. (The one thing I am convinced of is that it should not be managed either by central govt or LAs, but there is more scope for housing associations, co-operatives and joint-equity associations than has been common in the past.) The so-called ghost estate phenomenon may in some cases represent an opportunity to expand the scope for (and the concept of) social-housing beyond what was previously possible. Social pathology and bad-neighbour behaviours should remove the ‘right’ to be rehoused.
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