Media: No evidence of a land or property bubble

The_Conductor

From this morning's Irish Times- Leo Varadker claims there is no evidence of a land or property bubble............ Sort of beggars belief that he is trying to use Wizard of Oz proclamations to dispel the notion that we have a property bubble, driven by scarcity of supply.

Article here (note: behind the IT's paywall- if you've gone over your quota of free articles- you may not be able to access it)

Bob24

The_Conductor wrote: »

From this morning's Irish Times- Leo Varadker claims there is no evidence of a land or property bubble............

The way I read this paragraph:

Asked about recent warnings from the Central Bank and the National Treasury Management Agency (NTMA), and if he thought there was a land bubble or a property bubble in Ireland today, the Taoiseach said: “On a land bubble, I don’t. But I do think there is a lot of land that isn’t being made available for development quickly enough, and that is why we brought in the derelict sites levy, for example, and the vacant site tax to make sure there is more land available, and is also why we are setting up the land development agency which will have CPO powers to acquire land and develop it. That is the action that is taking place.”

Is that he clearly states he doesn’t think there is a land bubble *BUT* carefully avoids to answer the second part of the question about a property bubble. So he’s not saying there is no property bubble and his avoidance of the question possibly gives a clue about what he thinks.

lawred2

The_Conductor wrote: »

From this morning's Irish Times- Leo Varadker claims there is no evidence of a land or property bubble............ Sort of beggars belief that he is trying to use Wizard of Oz proclamations to dispel the notion that we have a property bubble, driven by scarcity of supply.

Article here (note: behind the IT's paywall- if you've gone over your quota of free articles- you may not be able to access it)

what's the definition of a bubble?

something being scarce and expensive doesn't necessarily mean a bubble.

lawred2

lawred2 wrote: »

what's the definition of a bubble?

something being scarce and expensive doesn't necessarily mean a bubble.

Exactly what I was going to say, what is a bubble?

Credit is quite obviously much more tightly controlled than it was in the past decade or whatever. There's no question of that. People generally are buying what the central bank has deemed is affordable, based on their lending criteria.

zl1whqvjs75cdy

As long as the central bank keep the head we should be ok. Prices may be a bit inflated now, but when supply catches up (2 to 3 years at least) they may start to slowly decline.

One piece of the puzzle I haven't seen discussed though is what happens when builders can't make enough profit? There is another thread on here about the high end houses in New developments not really selling or seeing price drops. Builders rely on them to make up smaller margins on the cheaper houses in the estate. If builders don't see the margins they will just stop building and we are right back to the start again. With the price of land ever increasing this should be a real concern.

One example I would give is cairn homes. They have the sight in d4 which will presumably cost a small fortune to live in. If they can't shift those they will go into a more lucrative side of construction, for example commercial space which the city is currently crying out for. More money to be made there.

I'm just spit balling here but I don't think it's as simple as just build more. The cost price of building needs to be addressed but the shortage of decent trades people will make this extremely difficult.

It really is as simple as build more houses and prices will fall.

The high costs excuse is somewhat fabricated. The building control regs that were introduced a few years ago required a number of signatures from certain people acting as certifiers at both the design stage and the building stage. The purpose is so that future deficiencies in either the design or the construction can be traced back and somebody held responsible (think Priory Hall or that apartment complex on the quays).

This is something that should have always been done, but wasn't regulated. Now that individuals had to sign off on it, all of a sudden they started charging (each other) a fortune for it. Suddenly its prohibitively expensive to build a load of houses? The only thing that changed is a legal avenue of chasing the cowboys.

godtabh

I met a UK based fund manager yesterday who also has a PRSA company. He is irish and was over looking at the marker.

He says that landprices are so expensive the only way to get a PRSA scheme to work is to have densities of 70/ha (I think ABP want 35/ha). He says land is too expensive.

I also work with some retailers. One has stopped its expansion plan as it cant afford land. Its whole business model was built up based on buying cheap land on edge of towns.

godtabh

Deleted User wrote: »

It really is as simple as build more houses and prices will fall.

The high costs excuse is somewhat fabricated. The building control regs that were introduced a few years ago required a number of signatures from certain people acting as certifiers at both the design stage and the building stage. The purpose is so that future deficiencies in either the design or the construction can be traced back and somebody held responsible (think Priory Hall or that apartment complex on the quays).

This is something that should have always been done, but wasn't regulated. Now that individuals had to sign off on it, all of a sudden they started charging (each other) a fortune for it. Suddenly its prohibitively expensive to build a load of houses? The only thing that changed is a legal avenue of chasing the cowboys.

As an engineering doing BCAR work developers have not allowed for this expense and do not realise the work involved. Things are more expensive but in the over all scheme of things you are talking about €200 per house.

Geuze

godtabh wrote: »

I met a UK based fund manager yesterday who also has a PRSA company. He is irish and was over looking at the marker.

He says that landprices are so expensive the only way to get a PRSA scheme to work is to have densities of 70/ha (I think ABP want 35/ha). He says land is too expensive.

I also work with some retailers. One has stopped its expansion plan as it cant afford land. Its whole business model was built up based on buying cheap land on edge of towns.

Yes, land is way too expensive.

We need much more public policy tools to drive down land prices.

zl1whqvjs75cdy

Geuze wrote: »

Yes, land is way too expensive.

We need much more public policy tools to drive down land prices.

No fear of that with fg in place. If they wanted to do it they would have done it by now.

Arthur Daley

donkeyoaty0099 wrote: »

No fear of that with fg in place. If they wanted to do it they would have done it by now.

With the exception of a few big multinationals inflating GDP and paying little Corp Tax, the Celtic Tiger economy was built on a land bubble. But Ireland is not unique, there are land bubbles across the western world.

FG have re inflated this since they came in and changed everything in 2011. The oldest trick in the book, dress up the tired old product in brand new packaging.

davo10

Arthur Daley wrote: »

With the exception of a few big multinationals inflating GDP and paying little Corp Tax, the Celtic Tiger economy was built on a land bubble. But Ireland is not unique, there are land bubbles across the western world.

FG have re inflated this since they came in and changed everything in 2011. The oldest trick in the book, dress up the tired old product in brand new packaging.

I thought it was cheap, easily obtained credit and property speculation. Credit is more limited and harder to come by now, just that there aren't enough properties available for buyers.

I have no political affiliation, but you have to admit the country's recovery under FGs stewardship has been impressive.

Arthur Daley

davo10 wrote: »

there aren't enough properties available for buyers.

I have no political affiliation, but you have to admit the country's recovery under FGs stewardship has been impressive.

Housing was unaffordable in the Celtic Tiger years. Agree that a totally irresponsible Credit splurge fooled the vast majority of people that they were part of this, despite their mediocre earnings.

Housing is still unaffordable. So you could argue what recovery has there been in this measure of quality of life. Also the Private debts racked up under FF, are still there, but they are Public debts now (as agreed to by FF), rolled out into the never never.


Really we have gone back to 2006/2007 again, but the cups have moved around a bit through sleight of hand. Maybe 80% of the country wanted that, and FG/FF delivers it.

Anyway, there is plenty of evidence of a land bubble, but most developed economies have land bubbles to varying degrees.

Diemos

There is no bubble....and if there was a bubble we'd have a soft landing.

davo10

Arthur Daley wrote: »

Housing was unaffordable in the Celtic Tiger years. Agree that a totally irresponsible Credit splurge fooled the vast majority of people that they were part of this, despite their mediocre earnings.

Housing is still unaffordable. So you could argue what recovery has there been in this measure of quality of life. Also the Private debts racked up under FF, are still there, but they are Public debts now (as agreed to by FF), rolled out into the never never.


Really we have gone back to 2006/2007 again, but the cups have moved around a bit through sleight of hand. Maybe 80% of the country wanted that, and FG/FF delivers it.

Anyway, there is plenty of evidence of a land bubble, but most developed economies have land bubbles to varying degrees.

The price rise is not due to credit or speculation, it is due to lack of supply, two completely different reasons and likely outcomes. Supply will takes years to catch up to demand. Quality of life has improved for most, employment is very high, wages are increasing, consumer confidence and spending is going up as evidenced by the high increase in tax take. There is always be complaints about property prices in major cities, that is world wide, but value can still be found in most areas outside Dublin where supply is less critical.

I would agree with you though that FG are responsible for some missteps, their interference in the rental market and the lack of balanced legislative rights for both LLs and tenants has been an absolute disaster. Also, their reluctance to free up some properties owned by NAMA for development seems counterproductive, but overall, the changes to lending practices and the improvements in oversight have made a crash less likely.

the_syco

Geuze wrote: »

We need much more public policy tools to drive down land prices.

Will there be a minimum amount of land for this proposed tool? For example, will it allow CPO's on people who have large gardens, to build social housing there?

The_Conductor

the_syco wrote: »

Will there be a minimum amount of land for this proposed tool? For example, will it allow CPO's on people who have large gardens, to build social housing there?

Can't see how that would be helpful- there are a few different issues at play- one of which has to be large scale construction. With all due respect- plonking a house or two in someone's back garden- is not particularly helpful- on the other hand- plonking a 5 storey 70 unit apartment complex there- and demolishing the original house- might work...........

We need to get off our addiction to low density housing- its killing Irish workers- we need high rise high density residential accommodation. I read an article recently (think it was in the Irish Times)- which examined the Irish fascination with lowrise developments- and the arguments made- such as the need to secure the heritage of our Georgian Housing stock- and they then compared the average height of Irish buildings- and the densities- with other traditional Georgian cities of a comparable size (including Copenhagen in Europe and Boston in the US). The Irish preoccupation with lowrise- was not supported by international comparators- with average densities and heights in Georgian quarters of twice the level in any comparable sized cities internationally. We are deliberately sticking two fingers up to Irish workers. We really don't give a fig for the Irish people and are hanging them out to dry.

troyzer

It technically isn't a bubble. A bubble is the growth in the price of an asset beyond its intrinsic value.

The intrinsic value of property is its scarcity and the high demand so its intrinsic value probably is pretty close to its market value in this case.

The_Conductor

troyzer wrote: »

It technically isn't a bubble. A bubble is the growth in the price of an asset beyond its intrinsic value.

The intrinsic value of property is its scarcity and the high demand so its intrinsic value probably is pretty close to its market value in this case.

At a particular point in time............

Cut people's salaries- or drop some high salary positions (because of Brexit- or whatever)- and all of a sudden- an intrinsic value- shifts startlingly...........

Just because something is worth a defined financial value to someone today- does not mean that the defined financial value- won't change tomorrow.

troyzer

The_Conductor wrote: »

At a particular point in time............

Cut people's salaries- or drop some high salary positions (because of Brexit- or whatever)- and all of a sudden- an intrinsic value- shifts startlingly...........

Just because something is worth a defined financial value to someone today- does not mean that the defined financial value- won't change tomorrow.

Yes but isn't that true of anything? While you are technically right, that would mean nothing has any intrinsic value.

Geuze

the_syco wrote: »

Will there be a minimum amount of land for this proposed tool? For example, will it allow CPO's on people who have large gardens, to build social housing there?

By public policy tools I suggest:

LVT
vacant site levy - higher rate and implemented faster
higher comm rates on unused comm premises

maybe changes to CAT/CGT to encourage redevelopment and higher densities?

rules/taxes to prevent land hoarding


Here's a radical suggestion - CPO much of the two-storey housing within the canals in Dublin, compensate the owners well, and replace with 6-10 storey blocks of large apts?

johnnyskeleton

Geuze wrote: »

Here's a radical suggestion - CPO much of the two-storey housing within the canals in Dublin, compensate the owners well, and replace with 6-10 storey blocks of large apts?

While we are at it with dramatic schemes, we should encourage businesses to relocate outside of our cities to ease the pressure on dublin/cork/galway house prices while simultaneously bringing jobs to areas where there are few.

The_Conductor

johnnyskeleton wrote: »

While we are at it with dramatic schemes, we should encourage businesses to relocate outside of our cities to ease the pressure on dublin/cork/galway house prices while simultaneously bringing jobs to areas where there are few.

Nice in theory- however, the simple fact of the matter is- we only have a single city of any scale in an international context- and while you or I may hate Dublin and dread any days we have to go there- its a necessary evil. It is not the case that you can assume a 'build it and they will come' approach- we have vacant IDA premises the length and breadth of the country- and we have state aid rules which forbid favourtism to be shown to an incoming employer- so unless you get lucky and have a particular industry type of scale- or an anchor employer in a particular area (like Intel in Leixlip for example)- its simply not a viable suggestion (to say nothing of the fact that a lot of the employees of these companies- are young, mobile and international in nature- and a lot of them want to work in Dublin- you're not going to sell them on Westport or Tubercurry- its simply not going to be a viable alternate...........

We have a few hubs- where you might pull it off- pharmaceuticals in Cork, Medical devices in Galway, IT in Leixlip- etc- because of the presence of an anchor in the areas- other than that (ok there are a few others)- while its nice in theory- its a complete non-runner.

Even the concept of gateway cities- was abandoned by Charlie McCreevy in his race to buy votes.............