National Asset Management Agency
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PVC King,
You have indeed presented a very logical and expertly explained argument above. I don’t have a problem with where you are coming from. To be honest, if someone offered me a job to work on a large roll out, yuppie village project, I would pack away my scrupples and get down to work.
However, I want to point out for the record, that I have questions about the re-development model we seem to use. It suits a main contractor for sure to have a large project to work on. Sure. But I have to say it. Yvonne Farrell is right to a certain degree, in this context. What you do see in Ireland is construction rather than architecture. I would normally prefer to look at it from the construction point of view, rather than the architectural point of view. But Yvonne’s comment does carry weight in relation to site such as Battersea, or sites such as Mallow in Country Cork.
But apart from that, I think the point is not that Battersea had its roof taken off. The point is that many very ordinary un-listed buildings at certain locations in London, which housed viable businesses and enterprise have been vandalised by developers who purchased the building, for its land value. Not for the factory sitting on the land, with its 300 odd workforce.
The overall point is that we have become too clever in Great Britain and Ireland. We know how to fiddle the game only too well, in order to capture those profits accruing to land. Which are taxation free and funded often by a taxpayer. Brian Lucey should be concentrating on this aspect, and the need for a proper land taxation in Ireland. Rather than focussing on this ‘once off’ transfer of wealth from the public to the private purse.
It is not a once off thing, it is an on-going thing. That is why minister Eamon Ryan’s comment is relevant, that the economists should have spoken out, four or five years earlier. We need land taxation in order to halt these developers who speculatively buy land. We need to keep people in employment and we need to provide them with a workplace.
Rates are a taxation on the ‘property’. But of course, as soon as you vandalise the ‘property’ and fire all of the employees, you fly underneath the radar and don’t have to pay property tax. Land taxation on the other hand, would ensure that vandals cannot do what they do.
Brian O’ Hanlon
Dr. Garret Fitzgerald’s Saturday article in the Irish Times.
Moreover, the present populist anti-Nama mood, currently intensified by the manifesto of the 46 economists, could all too easily lead to the Opposition overplaying its hand – and there are signs of this happening.
http://www.irishtimes.com/newspaper/opinion/2009/0829/1224253462340.html
Brian O’ Hanlon
As usual Garret is right.
There is a real danger of talking ourselves into a recession that we convince ourselves is so deep that there is no way out of. The article below really p****d me off, this type of piece is far from objective and has no place in a paper of record such as the FT; it is a very cheap shot.
The reality is closer to a situation where the productive sector always competed with the best globally but that if it is taxed out of existance it will cease to exist having removed their valuable plant for Eastern Europe.
The real drag on the Irish economy is the cost of having much lower property taxes such as stamp duty, Capital Gains Tax etc flowing than our peers at present and 200,000 unemployed construction workers or almost 10% of the population. Given how heavily taxed people are elsewhere in the economy the last thing that is required is another stealth tax e.g. water or council tax which would be particularly unfair given the wedge people have forked out on stamp duty when times were better.
Put simply the over-reliance placed on property over the past decade will take a long time to work through; however at 22,500 homes per year it is clear that from a postion of over-production at 90,000 homes in 2006 the correction has been an over-reaction. What is required is a clear plan to get production of homes back to c50,000 units a year and regardless of what NAMA does with the subordinate bondholders; getting roughly half the 200,000 unployed property industry workers back to work and the other half retrained to new industires must take precedence.
It must however not be at a cost of damaging the reputation of the financial services industry which is where it is hoped a lot of the graduate jobs will be from 2011 onwards. I don’t envy the Government’s position on this but the result must ensure that the Irish Bank’s Senior Debt is protected, the construction industry funded to recover and that confidence in Dublin as a financial services centre of excellence is retained.
All very good points PVC King.
I only wish I had the wherewithal to continue an engagement with the issues, the development of policy and offer whatever services I could in the NAMA process. Still, I take confidence from the web streamed debate on the RTE website today, that there are a number of others able to do that on my behalf. I have sat on a chair for four hours today, simply glued to the exchange in the web streamed joint Oireachtas committee debate on NAMA. That is the level of concentration with which I can focus on these issues. Because they pertain so much to an industry I worked in for a long while. However, that industry is in the process of falling apart, and I fell out of it a while back.
Many points of interest to me, did arise during the four hour long joint Oireachtas committee debate. But in terms of Ireland returning to a production of 50k housing units per year. It was noted that zoning exists in Ireland for around a million new homes on Ireland land at the moment. That is around 50k homes on the market over the next twenty years. Any one looking at the loan book of NAMA, will have to account for the existence of all of that zoned land. It will ultimately impact on the value of some of the NAMA portfolio.
On the other hand, it was suggested that Ireland could now use NAMA as a means to regulate certain aspects of the property market. It could be ensured that an orderly release of land and property could take place. In that way, the old vested interests in the Irish property market could be neutralised. They wouldn’t be able to ‘corner the market’ as they had done in previous years. That is one possible form of ‘social gain’ from NAMA, which could be bought at some expense to the commercial viability of NAMA on behalf of the taxpayer.
So it will be interesting to see how this plays out. From my own experience, I know that the ratio of land to construction values of dwellings near the LUAS line in Dublin South reached almost, but not quite ten is to one. (At the tail end of the Celtic Tiger boom) What sickens me personally, is that individuals in the architecture profession seemed to relish in that environment. It meant that no cost in terms of construction was un-justified, or no detail too expensive, because the cost of construction was small by comparison with land values.
I am reliably informed now, that the ratio of land to construction value, should be more like one is to three. That simple yard stick alone will illustrate how silly, not only home buyers and speculators had become. But also poor example it afforded to design professionals trying to establish principles by which to approach residential as a building type.
We can take a lot of encouragement from what minister Brian Lenehan said today. He suggested, that the NAMA process will enable the construction industry to work with a better model than it did in the past. That the methods of financing in the Irish construction and development industry were in fact primitive in the past. So the model by which the 50k housing units per annum are produced, will be radically different to what it was in the past. There is certainly opportunity presented there.
The old argument by the architectural profession was always that, if houses were ‘worth more’ that the architect could get involved and input more into the process of designing homes. Indeed many design professionals though finding it difficult to buy their own home, were very satisfied to be designing housing units that sold on the market for 500k. Even if the demand for 500k priced homes was held up by a nation of speculators. The architectural profession rejoiced in the fact they would have better design opportunities.
That was one of the criticisms I heard regularly while working for Liam Carroll. While we were in a buoyant market around 2006, Carroll was still selling product into a market which didn’t display the level of improvement which designers hoped they would see. The level of improvement which would create a significant enough margin for architects to get involved in the design process for residential schemes. Carroll as a developer and possible ‘client’ to an architectural consultancy, wasn’t making the greatly inflated margin available to them as design consultants, in order to produce new, radical and innovative residential design. The kind you see on the cover of all the best architectural magazines, I presume.
In other words, so that Irish architectural practices could get themselves on the cover of the best architectural magazines. I hope that NAMA will provide a vehicle for doing this in the future. Without the very toxic element, which required the massive margin to be there, in order to facilitate good design. During the Celtic Tiger there was an inappropriate relationship forming between ‘good design’ and inflated prices of residential property. One which was healthy for no party, most of all the designer. That is why I worked through the Celtic Tiger with guys such as Liam Carroll.
I always felt it was immoral of architectural profession. On the one hand, ordinary people were being squeezed to the hilt to buy a house of any description. But architects rejoiced because something deeply unsustainable and even toxic, afforded them design opportunities and employment. The prospect NAMA does allow for is the involvement of design professionals right through the process of development, in almost every aspect. But they can do so, without requiring the price of the product to shoot through the roof. That in turn will enable society to view architects as being on their side. Instead of architects being viewed at the moment, as a luxury that ordinary people cannot afford and should avoid.
The most important point I took from my viewing of the web streamed joint Oireachtas committee debate on NAMA today – was that NAMA is a cooperation with the Irish banking institutions. In order to allow the Irish banks to realise their losses as soon as possible. Rather than doing, what banks would do in the interests of their shareholders. Which is to conceal the rather large problem borrowers they may have on their books, over a period of decades.
NAMA is a way to avoid Irish banks taking the ‘entrenchment’ position where they cease to lend and operate in the Irish economy for a decade or more. In other words, to try and work their own way out of their losses over an extended period of time. I think, in this regard, the NAMA proposal might utilise the small size of Ireland to its advantage. In Japan by contrast, the losses of the banks were realised over a very long period of time. Which resulted in the Japanese changing their government in the elections this year for the first time.
I really wish I had time to say a lot more on this myself. I would enjoy debating and dealing with the issues. But committments elsewhere have really chewed up what is left of my time.
Brian O’ Hanlon
@PVC King wrote:
As usual Garret is right.
Not going to get into an argument on Garret the Good usually being right, but on this occasion he is correct.
@PVC King wrote:
There is a real danger of talking ourselves into a recession that we convince ourselves is so deep that there is no way out of. The article below really p****d me off, this type of piece is far from objective and has no place in a paper of record such as the FT; it is a very cheap shot. http://www.ft.com/cms/s/b83102fe-9590-11de-90e0-00144feabdc0,Authorised=false.html?_i_location=http%3A%2F%2Fwww.ft.com%2Fcms%2Fs%2F0%2Fb83102fe-9590-11de-90e0-00144feabdc0.html&_i_referer=http%3A%2F%2Fwww.ft.com%2Fhome%2Fuk
…a real danger of talking ourselves into a recession? Er, em, did I miss something? I agree with that article. It hits the nail on the head on almost everything, and is a far cry from the BS that the Economist used to write about Oirland. Granted the comments about Quinlan and Carroll were a bit gratuitous, but they grabbed attention.
@PVC King wrote:
What is required is a clear plan to get production of homes back to c50,000 units a year and regardless of what NAMA does with the subordinate bondholders; getting roughly half the 200,000 unployed property industry workers back to work and the other half retrained to new industires must take precedence.
Not a hope in hell. We will not need 50k homes a year for at least a decade. Nor do we need 100k employed in the industry.
Over the six years up to 2004 employment in the construction sector had increased by 80,000 or 63.5%. By 2007, more than 206,000 were employed in the sector, accounting for 11% of total employment in the economy or 16% of total private-sector non-agricultural employment. Furthermore, in 2004, omitting the financial institutions in the Top 1000 list, building companies accounted for 147 (or 16%) of the remaining 920 companies.
Sadly too many people in the construction sector have not yet realized that it is totally screwed. I was talking to a builder at the weekend and he is confident that he will get paid by a company that, in my opinion, will be a core constituent of NAMA. The money he is owed is now more than 12 months past due. Sad, but true. I didn’t spoil his few pints.
Care to comment on the merits of “pay when paid” contracts anyone?Rs
K.I’m with Kerry Bog on this. I haven’t a clue where PVC gets this 50K a year figure. The population is falling this year for the first time in 15 or 20 years. The inevitable higher taxes required to service the tripling of the national debt this year alone will drive even more people out. The country has a huge stock of empty houses.
And please – “talking ourselves into a recession”? This expression sent my internal bullshit meter off the scale when it was first bandied about 2 or more years ago by the likes of Bertie. It’s even more ludicrous now.
We really did make monumentally disastrous economic mistakes over the last 5 years. What is galling is that the scale of these mistakes (spiralling government spending, failure to regulate retail banks and continuing to apply stimulus to an overheated property market) are such that they swamp all the economic good that Ireland has achieved.
There is simply no avoiding the horrendous scale of what is going on. In particular It will take THREE ENTIRE YEARS of income tax take just to repay the nominal amount of borrowing this year and that is without the cost of borrowing to capitalise NAMA. I have done some rough financial models to see how long it will take before the entire income tax take will be required just to pay the interest on the national debt and it is less than 7 years. If you think an optimistic pep-talk will fix this problem, you’re living in la-la land.
I agree with KerryBog above. The attitude he described, of the man having his few pints over the weekend, is exactly the same attitude I have encountered myself. Indeed, it is so that it is impossible to hold any balanced conversation regarding the future. Guys who grew up in the Irish construction industry are in deeper trouble than we all realize. I don’t know what it is going to take for many to understand, it is all over basically. It is still a deeply unpopular thing to suggest out there. Typically, in conversations I have to talk on only one side of the argument. Namely, the one which suggests it will be all okay and this is all a bad dream of some sort.
Although, minister Brian Lenehan did his best today in the joint Oireachtas hearing to illustrate that the economic commentators 30% of €90 billion of loans valuations was off the mark. Lenehan also pointed out repeatedly, that the market saw both BOI and AIB as having a viable future.
(I am only grabbing snipets here, off the top of my head. One should watch the four hours of debate and question-ing, if one wishes to get a better grasp of the debate)
Lenehan also pointed out that Ireland’s taxpayer was somewhat insulated against the prospect of over paying for NAMA loans already. By the fact that we already own Anglo Irish bank, which will transfer roughly €30 billion to NAMA. So there is no risk there of over paying for the loans, since we already own the bank. Also, that 25% of BOI and AIB was available to the government in the form of warrants on the bank equity. (acquired by the Irish government at under 60 cents) Additional shares in both banks, if deemed necessary would be bought in the form of vanilla bank shares. If those were purchased by the government, there would of course be a risk of the shares losing their value and the government making a loss.
That markets would quickly ascertain the extent of BOI and AIB distressed loans after the 16th Sept, based on the amounts of government bonds issued to both of those institutions.
The main objection that Brian Lenehan had with the ‘good bank’ proposal by Fine Gael was a logistical one. That it would take in the region of one full year to establish such a bank. Even though, the model already exists and has been approved by the ECB elsewhere in Europe. But the importance of a recovery in the real economy was stressed by a lot of questions to the minister for Finance. That unless the real economy recovered, then an improvement in the property portfolio value was impossible. To that extent, it was suggested that a ‘good bank’ would be required at some stage, no matter what, in order to get funds flowing to small business.
As I said, I would love to have time and energy to describe more of the preceedings today. But it looks as if I am fresh out of resources once again, duties call etc.
Brian O’ Hanlon
Reasonably decent job of reporting done by Joe Brennan and Thomas Molloy here.
I have problems with how summarised a lot of the newspaper articles are. However, newspapers are in the business of selling shortened versions of events to the public, for the price of the paper I guess.
The independent article is one of the more useful ‘short summaries’ I have come across.
The same story is carried by the Irish Times today on it’s front page.
http://www.irishtimes.com/newspaper/frontpage/2009/0901/1224253590059.html
Brian O’ Hanlon
In another piece in todays Irish Independent, I came across this line.
“The capital ratios of the two banks are more than adequate,” Mr Lenihan said.
Minister Brian Lenehan yesterday did acknowledge the fact, that moving the loans into NAMA might adversely effect the capital ratio of the banks in the short term. Which would require the government to buy the vanilla stock market equity in those two banks, if needed. But at least, we would be getting a cleaner banking system to work with.
Personally speaking, I believe that is all well and good. What I am more interested in, is that we get down to the level of the property and land itself. That we endeavour to try and clean up some of the mess, that exists down at that basic level also. That is important in my view, for the future of the construction and development industry in Ireland. How effective or otherwise, NAMA will be in that regard is one of my chief concerns.
Along with the obvious one voiced by the opposition in yesterday’s debate. What guarantee or incentive does a NAMA solution provide, that credit will begin to flow in the Irish system again. In other words, what is to stop Irish banks simply allowing their government bonds to lie idle inside of their institutions in order to bolster their capital ratio position. But there again, minister Lenehan pointed out, that even if the government bonds remained un-cashed in the Irish banks – it would still improve things. The wider markets would take heed of the fact that the Irish banks had those bonds available, and therefore, would have better confidence to invest in Irish banks.
It was also mentioned in the debate yesterday, that Irish government bonds issued by NAMA, could and will be traded on markets in the manner every other bond is.
Brian O’ Hanlon
An article worth reading in today’s Irish Times. Eoin McDermott, a chartered surveyor wrote:
Another important factor in this process will be the categorisation of property assets including undeveloped unzoned land, undeveloped zoned land (greenfield, brownfield, prime urban), undeveloped property with planning refusal, undeveloped property with planning permission, partially completed buildings, completed unoccupied buildings, completed partially occupied buildings, etc.
It is imperative that an overall strategy and action plan is put in place for the macro management of these distressed loan assets.
http://www.irishtimes.com/newspaper/opinion/2009/0901/1224253586371.html
Brian O’ Hanlon
George Lee certainly does have a point. This development in the NAMA debate emerged today.
George Lee said small businesses are none the wiser about their future after yesterday.
Small business is still not satisfied it seems that things are moving quickly enough from their point of view, in order to start a recovery from the current recession. As Kieran O’Donnell, Fine Gael TD said in yesterdays joint Oireachtas question time on NAMA, we are looking now at property to try and find answers going forward into the future. It was a point raised by deputy O’Donnell yesterday, but like a lot of questions it fell to one side and never got picked up again.
O’Donnell is correct. We are looking perhaps in the wrong area for solutions to the current problems facing the Irish nation. The Fine Gael proposal of a ‘good bank’ or whatever mechanism, does present an excellent solution of getting funds flowing to in-debted Irish business again, in order to prevent further erosion and possible long term damage to the Irish economy.
It boils down at this stage to an argument over which solution out there, will be the fastest to prevent damage occuring. Minister for Finance, Brian Lenehan does not believe that the Fine Gael solution would work fast enough to be effective. That cleaning up the Irish banking institutions loan book, and allowing those private banking institutions to start doing their work again, is the best and fastest solution.
Brian O’ Hanlon
@KerryBog2 wrote:
…a real danger of talking ourselves into a recession? Er, em, did I miss something? I agree with that article. It hits the nail on the head on almost everything, and is a far cry from the BS that the Economist used to write about Oirland. Granted the comments about Quinlan and Carroll were a bit gratuitous, but they grabbed attention.
KB, I sat at my desk late one evening in November of last year watching Citigroup come close to collapse; you got a real sense that the financial set up as I knew it had come to an end; a $500bn titan reduced to a negative value at that time probably exceeding $100bn. Those types of evenings were spent up to March 2009 and there was a real feeling that the Anglo-Saxon model that I grew up with had reached its end and that we would all surely be on the street by the end of 2009. Everytime I turned on the TV there was Robert Peston convincing me again and again that we were all screwed.
However things in the US and UK have since that time turned around; much of it to do with confidence. I agree that Ireland has got deeper problems than any other Eurozone country coming out of the last cycle. I couldn’t dispute that even if I wanted to. However the country also has a lot of positives.
1. Eurozone membership
2. Educated workforce
3. Low Corporation taxes
4. Ability to service the MNC sector
5. Sector specific excellence in high value areas such as IT, Pharma, Organic chemicals; fund custody and managementIf a clear plan existed there is certainly a way out of the current impasse; it is not going to be easy and there will be pain but you are not all screwed. My issue is not saying that it was a problem to say that in 2007 talking the economy down was a problem there was and Mervyn King as Governor of BoE is the only leader I saw that was completely honest that we were in for a very tough time into 2010; My problem is the continued negativity long after the worst is over and whilst the rest of the World is gearing up for the next growth cycle; no-one in Ireland seems to be excited about that opportunities that this new growth phase in key markets presents.
@KerryBog2 wrote:
Not a hope in hell. We will not need 50k homes a year for at least a decade. Nor do we need 100k employed in the industry.
Over the six years up to 2004 employment in the construction sector had increased by 80,000 or 63.5%. By 2007, more than 206,000 were employed in the sector, accounting for 11% of total employment in the economy or 16% of total private-sector non-agricultural employment. Furthermore, in 2004, omitting the financial institutions in the Top 1000 list, building companies accounted for 147 (or 16%) of the remaining 920 companies.
By the time you add in architects, engineers, surveyors, mortgage brokers, conveyancing solicitors, concrete producers, PVC Window makers!! and interior desigers the figure was according to the CIF a lot higher at close to 400,000.
I also fundamentally disagree that it will take a decade to get production up to just over 50% of 2006 levels. I’m not saying that property is the driver of the economy; I would further say I wouldn’t invest in an Irish bulky goods retail park for at least another 10 years. However property is an aspirational product that most Irish people wish to buy into. Where a lot of the bubble I think came from was the building of endless properties for the workforce that were building the units; as soon as production collapsed these guys lost their jobs and lost their homes or the intended purchasers couldn’t afford the deposits or in some cases just repatriated.
If the sectors where World Class Excellence such as IT, Pharma, Chemicals and Financial Services can be put onto a sustainable growth pattern it is the employees and directors of those enterprises that will consume the property. What I can’t see as having changed is that in 2003 when the population was lower than now; there was pent up demand in Dublin for 400,000 units (Dr. Brian Hughes DIT). To me is inconceivable is that in the intervening time when household formation patterns have led to even smaller family units that all of that demand has been satisfied and that with current demographic trends factoring in a recovery that those types of numbers can’t be hit.
@KerryBog2 wrote:
Sadly too many people in the construction sector have not yet realized that it is totally screwed. I was talking to a builder at the weekend and he is confident that he will get paid by a company that, in my opinion, will be a core constituent of NAMA. The money he is owed is now more than 12 months past due. Sad, but true. I didn’t spoil his few pints.
Care to comment on the merits of “pay when paid” contracts anyone?Rs
K.I work away from contracting so I have no idea what the phrase means but I would estimate that a lot of stage payments contractually due have not been made on time. What is clearly required is that the shakeout of the property investment, development and construction sectors happens and that once the viable are seperated from the failed that the sector is funded and not starved of cash to produce homes and employment.
Indications from published research indicate that Prime London Commercial stock has risen 25% in value since March. All about confidence in the rest of the economy to underpin long run average demand; 2006 levels won’t be seen in this cycle, assuming a new cycle commenced in March 2009. If Ireland had the Punt you would all be screwed luckily you still have a currency, a low corporation tax and growing markets. Cleaning up property lending excesses of the past decade is the key to the indigenous sector; doing it in a way that preserves employment is crucial.
According to Moody’s credit-rating agencies, California house prices will not return to peak boom levels until 2030 😮 Anybody think Ireland will out-perform the Golden State? http://lansner.freedomblogging.com/2009/09/01/housing-price-peak/35113/
A scheme to incentive-ise buyers was put out there by Glenkerrin and McNamara’s Radora company.
Finance Minister Brian Lenihan, however, expressed concern and asked the Financial Regulator to examine the regulatory and legal implications of the scheme.
These are times where one should have at least one crystal ball, if not too. Morgan Kelly’s one seems to function better than most, these days.
Brian O’ Hanlon
Powerful opinion piece in today’s Irish Times by Seán Barrett, senior lecturer at the department of economics in Trinity College Dublin: “Nama is a macroeconomic three-card trick to refinance incompetent bankers and reflate a property bubble without addressing reform in the property market, banks, or bank regulation” http://www.irishtimes.com/newspaper/opinion/2009/0902/1224253663079.html
“On April 5th last year the Economist asked: “Where are house prices most overvalued?†The answer was Ireland. Almost a third of house price increases between 1997 and 2007 could not be justified by economic fundamentals. The Irish house price rise of 251 per cent between 1997 and 2007 was double the US national index and was notably uncompetitive compared to Germany, Japan, Italy, France, Denmark, Australia, Canada and Sweden, and even with other house bubble countries such as the UK and Spain.”
Thanks Trace, I was going to link that article myself, because I felt it is worth reading. I thought this was a good paragraph.
The proponents of Nama describe the sale at market prices of impaired assets as a fire sale. The description is, of course, wrong. A fire sale involves assets harmed by the fire and the damage is incorporated in the price. The sale of empty houses, shops, hotels and land bought at inflated prices arises from the economic incompetence of the builders and bankers concerned and not because of any fire damage.
http://www.irishtimes.com/newspaper/opinion/2009/0902/1224253663079.html
I for one, am sick of hearing that ‘media friendly’ phrase of fire sale prices, in relation to everything about the Zoe developments court cases. Well done, professor Barrett.
Brian O’ Hanlon
Prof. Barrett covers several of the points I’ve already made here, so it is hard to disagree with most of his article. However, much of what he writes is predicated on a supposition that NAMA will take on loans at an uneconomic value. At this stage we do not know the price/discount. Goes back to my point about a lack of communication from our Government, about which I have been rattling on for quite some time. Until we know what the discount is almost all comment is BS. In the 1630’s days of the tulip bubble, bulbs that were exchanged for houses went back to being a regular, albeit slightly expensive garden flower. Many speculative properties/sites in Ireland will never regain the prices paid. We as a nation can only hope that NAMA does not overpay, and that it will be properly constituted and managed. The longer NAMA’s launch is delayed the worse it will get.
PVC King, your comments are based on your perception of the glass being half full. From what I see in the current market, I view the glass as half empty, badly cracked and leaking.
@PVC King wrote:
However the country also has a lot of positives.
1. Eurozone membership
2. Educated workforce
3. Low Corporation taxes
4. Ability to service the MNC sector
5. Sector specific excellence in high value areas such as IT, Pharma, Organic chemicals; fund custody and managementThese apply to many other EU States, all of whom, unlike us, have said YES to Lisbon. The cost of our “excellence†is also considerably higher, leading to the closure of pharma and IT companies. Ask anyone at Dell. Our much-vaunted financial skills have long been undermined, as has our total absence of financial regulation for decades, e.g. Irish Trust Bank, Merchant Banking, PMPA, InsCorp, Ruznak, Ansbacher, offshore deposits, overcharging, Parmalat, etc.
@PVC King wrote:
My problem is the continued negativity long after the worst is over
The worst is far from over. See my concluding comment below.
@PVC King wrote:
By the time you add in architects, engineers, surveyors, mortgage brokers, conveyancing solicitors, concrete producers, PVC Window makers!! and interior desigers the figure was according to the CIF a lot higher at close to 400,000.
That strengthens my argument. With a total employment force of about 2 million, we have 20% employed in one domestic sector? Eggs, basket comes to mind.
@PVC King wrote:
Where a lot of the bubble I think came from was the building of endless properties for the workforce that were building the units; as soon as production collapsed these guys lost their jobs and lost their homes or the intended purchasers couldn’t afford the deposits or in some cases just repatriated.
No. There was unwarranted building of houses in the belief that someone living in a housing estate in a city would buy a holiday home in a housing estate in a rural village, with no amenities, few services and no transport. When those houses did not sell, they were used to house the foreign workers and the rent deducted from their wages, to help the builders’ cashflow. This disguised the early signs of the collapse.
@PVC King wrote:
What is clearly required is that the shakeout of the property investment, development and construction sectors happens and that once the viable are seperated from the failed that the sector is funded and not starved of cash to produce homes and employment.
Indications from published research indicate that Prime London Commercial stock has risen 25% in value since March. All about confidence in the rest of the economy to underpin long run average demand
There is a dim glimmer in the UK property market but that is all it is. In a recent report by accountants BDO, UK manufacturing output – a key figure – remains significantly below pre-recession levels. They also estimate that there will be about 2,500 business failures in 2009, compared to the 1,600 recorded in 2008, and they estimate a figure of 2,000 for 2010. Personal bankruptcy levels are at an all-time high, and probably will exceed 120k this year. (Question – is it a matter of time before Ireland adopts a similar form of personal bankruptcy to the IVA in the UK?)
In Ireland, the rate of business failure is equally high. In the construction sector the increase in failures has been spectacular, with first-half construction failure figures for 2007,2008,2009 being 60, 130 and 250 respectively. Total insolvency figures more than doubled between H1 2008 and H1 2009, from about 300 to about 750.
When NAMA gets going we will see the start of the shake-out. Most of the contractors I have seen recently could not be classed as viable. The big guys will be defunct and will bring many more with them. The efficacy of personal guarantees will prove almost worthless, key assets will be unreachable and expensive homes will be in wives’ names. Then the subbies and suppliers will discover that they never will be paid for their debts. Their accountants will not sign off on y/e figures, or balance sheet valuations, so a lot more will fail. A contributory factor will be lack of finance due to the opaqueness of the financials, where lenders will mistrust the stated values of fixed assets and the real or true worth of the applicant’s debtors. (The same reasoning can be applied to why FG’s “Good Bank” idea is a dead duck. There currently is money available, but who would lend on an asset that cannot be properly valued and when the repayment ability is totally suspect?)
For those reasons Joe Public will be slow to buy, unsure of his investment, and the market will stagnate just as it did when the Rotweiler made his comments on Stamp Duty changes. That’s why I remain negative and cannot change until we see what NAMA brings.
Rs
K.The efficacy of personal guarantees will prove almost worthless, key assets will be unreachable and expensive homes will be in wives’ names.
Again, I would like to agree with the above statement. A major bulk of transactions carried out in the construction sector were done with personal guarantees during boom times.
NAMA is not going to solve or even address that. Heck, we have problems in the High court case today, even trying to define in terms of the construction sector, what grossly insolvent means. If the courts are facing that problem today, NAMA will face precisely the same problem as we try to move forward.
ACC bank are probably correct in that regard. We need to establish some firm ground rules, for the market to work by, and fast.
KB is correct, the longer NAMA drags on, the worse things will get.
A contributory factor will be lack of finance due to the opaqueness of the financials, where lenders will mistrust the stated values of fixed assets and the real or true worth of the applicant’s debtors.
That applies very much to the large names in the construction industry, who did not develop skills it the area of reporting.
With one or two exceptions. I understand it, that a couple of builders are honest with their subbies, and did inform them of cash flow situations throughout the boom years. Maybe those contractors and sub-contractors will be better off.
But in most cases, sub-contractors were involved with several different contractors. So their exposure, though better in some areas, will be a lot worse in others.
Brian O’ Hanlon
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