Re: Re: The Question of Land

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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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