Re: Re: The Question of Land
@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 â€œproperty.â€ 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 â€“ 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 â€“ 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.
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?
â€¢ Over 86,000 dwellings units were completed.
â€¢ 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.
â€¢ Residential construction accounted for two thirds of total building and construction output.
On those figures, how can it be suggested that developers were sane?
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 â‚¬50k bathrooms and â‚¬100k kitchens, â€œMy awrchitect said we should allow at least 10% of the cost of our new house to spend on a kitchen.â€)
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 Irelandâ€™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 â€“ 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 CRISPIâ€™s (cash rich Irish seeking property investments).
Irelandâ€™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 â€œspecialâ€ 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 mid1900â€™s, located in say Dalkey. These houses are small, could be valued as follows:
Building cost = â‚¬140k
Site value calculated @ 30% = â‚¬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 â‚¬199k, of which the site is just 60k or 30%. (With a density of at least 30 per acre, that works out at about â‚¬2 million an acre.) Suppose my figures are out â€“ double them, giving a value of â‚¬400k. Not enough for Dalkey? Treble them, â‚¬600k.
What were these houses selling for a couple of years ago?
On average, it was â‚¬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?