Tuesday, 27 April 2010

Half Now In Negative Equity...

Half of us now in negative equity misery...

HUNDREDS of thousands of Irish homeowners could face negative equity as early as June.

A report from NCB stockbrokers has outlined that as many as 45pc of householders could owe more on their mortgage than their house is worth.

NCB economist Brian Devine says that house prices, as officially measured, are still overvalued.

"Our estimate for Ireland suggests the number of homes in negative equity ranges between 29pc and 46pc depending on the price decline assumed," Mr Devine outlined.

NCB believes prices are already 35pc below their peak, meaning close to one in three homeowners are already in negative equity.

"There is little reason to believe that house prices will not continue to fall as future employment prospects remain bleak, further tax hikes are in the pipeline, confidence remains low, emigration is likely and there remains a large supply of properties for sale," the NCB report claimed. "Affordability may have improved sharply but until confidence and job certainty are restored this means very little to many prospective buyers."

In an analysis comparing the advantages of renting or buying, Mr Devine said that as long as the house will be worth more than €145k in 25 years' time, it "makes sense for a household to purchase rather than rent at current prices".

"If prices are not greater than €145k in 25 years' time it would represent the most spectacular collapse in real (inflation adjusted) house prices on record," he added.

The report said that housing transactions would slow down as homeowners were reluctant to accept the loss on their home and refused to sell the property for a realistic price.

"They will set higher asking prices causing properties to sit on the market," the report said.

Figures from the last Permanent TSB house price index showed prices were down 3.6pc in December and additional falls of 10pc or more could well be recorded before June.

However, the stockbrokers said that there are clear signs of improvement in the general economic situation in Ireland.

Report by Claire Murphy - Evening Herald

Saturday, 24 April 2010

Young, Irish And Out Of Here...

As the government continues to pump billions into our much discredited banking system, many Irish people unable to find work here are facing into a future outside of this country. John Downes, News Investigations Correspondent, spoke to some of the new Irish diaspora about their recent experiences of emigration...

By any stretch of the imagination, they were a startling set of figures, prompting echoes of a past which we thought we had left behind.

According to ESRI data released last week, we can expect net emigration of 60,000 in the year to this April – and a further 40,000 by April 2011. That's almost 1,000 of our best and brightest leaving every week.

Yet the ESRI's predictions are simply the latest – if most stark – indications of a return to mass emigration among Ireland's unemployed, as the downturn has continued to take its toll.

In September, for example, the Central Statistics Office revealed that Ireland witnessed a return to net emigration for the first time since 1995, with the number of emigrants increasing by over 40% to 65,100 in the 12 months to April 2009.

A significant portion of those emigrating were non-Irish nationals returning home. But the CSO figures, which are by now almost a year out of date, also suggested that a new wave of emigration had already begun among Ireland's jobless masses.

By last month alone, there were more than 433,000 people on the seasonally adjusted live register, reflecting an increase of 65,918 alone in the 12 months to March.

If the ESRI's predictions are correct, as many as 100,000 of these will have emigrated over a two-year period to April 2011.

So while the government continues to invest billions of euro in the banks via Nama, it appears that many Irish people unable to find work here are now facing into the prospect of having to build a life outside their home country.

Many are highly educated and are simply desperate to escape an economic downturn which has robbed them of a future on these shores. Others find themselves effectively stranded abroad and unable to return home due to a lack of job opportunities.

The Sunday Tribune spoke to some of these new Irish emigrants around the world, and asked the question: What now for this new Irish diaspora?

Michael Dennehy, UK - 'I had a couple of buddies living in Woolwich, London and they said there were jobs going... I had a job within three days'

One of Michael Dennehy's first moves after he lost his sales job in Cork last year was to seek out his contacts within the Irish community in London.

Within weeks, the 27-year-old was working in construction there while playing for the Cuchulainns GAA club based in south London. The link between the two was not entirely coincidental.

"I had a couple of buddies living in Woolwich, and they said there were jobs going. They had a house over here with five bedrooms, and only two of them in the house. I had a job within three days. One of the guys in the club had a construction business and he gave me a labouring job."

The work was very different from what he was used to, having worked continuously in the sales business since his late teens.

"I wouldn't exactly be Captain Construction, but it gave me a little bit of income and got me on my feet. It was ground work – anything from digging the ground to general labour – and I did it for a couple of months. It suited me fine at the start."

Since making the move to London, he has prospered, and now rents his own apartment in Islington.

More importantly, he has moved back into sales, working for a company which supplies the motor trade. It is a similar sales rep role to the one he had in Ireland.

"With the GAA I've made a lot of friends. I think if I hadn't had the GAA aspect I wouldn't have fitted in as well," he says. "You have people to go out socialising with straight away – there's a structure in place. You head out with the guys at the weekend. And obviously I got a job out of it too."

While he is enjoying life in the UK, and always had it in the back of his mind to travel abroad to work at some stage, he says he would more than likely still be at home if it had not been for the downturn here.

"There are good prospects within the company I am working for, whereas in Ireland I don't think there are any," he says."Eight or nine of my friends back home are unemployed, drawing the dole. A couple have gone to Australia.

"There isn't much happening at home, and nothing to go back for as far as I'm concerned. I talk to my parents and friends – they tell me there is nothing for me jobs wise."

"I'd say I will move back to Ireland more than likely, but it depends on how things are. I wouldn't move home just to go on the dole."

Derek Flynn, Dubai - 'If it had been different I would have loved to have stayed in Ireland and have a family'

It was in late 2008 that chef Derek Flynn (37) and his wife Angela first began to notice the tell-tale signs of recession-era Ireland at the small bar and restaurant they ran in Killala, Co Mayo.

They could see the business changing: customers were not drinking or dining out midweek, and the weekend trade became quieter.

The situation did not improve, and he looked into taking a lease on various other kitchens in the area. But rents were too expensive, and people still wanted "big money" regardless of the business downturn.

Just over a year earlier, the pair had jumped at the chance to return home from Dubai, where they had lived since 2000.

"The reason we went back was because Ireland was doing so well. It was great to be close to home again. my father is a farmer, so I enjoyed my time doing a bit on the farm again. In Killala, a small fishing town, working in the bar and restaurant was enjoyable and lively. Being home was what I wanted," he says.

The recession in Ireland put an end to all that, however. Last September, the couple moved back to the United Arab Emirates, where Flynn now works as an executive chef.

"Living away from Ireland does mean you miss your family an awful lot, but they come out to visit," he says. "It is a shame what has happened in Ireland and I hear from friends it's not really improving. It saddens me to think the government are not trying hard enough. Ireland was booming for years, and to think no money was put away for the rainy day, it doesn't seem right ? what are the government doing?

"If it had been different I would have loved to have stayed in Ireland and settled there to start a family. Schools are good here, but there are no rolling green fields for children to roll around in. I hope it improves in Ireland soon."

Pat Lowney, Canada - 'I just came at first for a year out and did not intend to stay for as long as I have done'

For engineering technician Pat Lowney (34) from Beara in Cork, the reality of emigration during a downturn truly began to kick in after he was made redundant from the local consulting firm in Vancouver where he had been working. It was the third round of layoffs at the firm.

"I first came to Canada in October 2007. I just came at first for a year out and did not intend to stay for as long as I have done. It was not a nice feeling to be out of work in a foreign country, especially when your visa depends on you being employed," he says.

"But the option of returning to Cork was not there, as the recession was far worse."

He eventually found more work with a firm of consulting engineers, which is involved with a multi-billion dollar road-building project called the Port Mann highway.

Despite having worked in both the USA and Australia previously, he found it difficult to settle into life in Vancouver at first.

He cites the "lacklustre nightlife scene" as one key difference, adding that it took him about six months to really "crack" the city.

As is the case for so many other Irish emigrants, key to this was the role of local Irish organisations such Vancouver's Irish Sporting and Social Club.

"I went to Gaelic football training and it took off from there. There were many nationalities at training as it was a downtown location. From there I met some fellow snowboarders and gradually built up my friends network," he says.

Lowney has no plans to move home at present, although he would like to do so eventually. This is because it would be "next to impossible" to secure a job in civil engineering here.

Instead, he intends to apply for permanent residency to give himself a more secure footing in Canada.

"I guess I'm stuck here for the immediate future but I could think of worse places to be... I miss family more than I miss Ireland. If I could meet with them every six months that would be ideal, but that's not possible: a flight home is about $1,300," he says.

"I have returned to Ireland to act as groomsman for one of my best friends' wedding. It was good to meet all my friends and family again, but all people said was 'stay where you are, boy, there's nothing going on here'."

David Joyce, South Africa - 'The quality of life here is so good and the country is truly beautiful. The only downside is the political situation'

'The weather is too good here. I was home last month for my sister's wedding and I was miserable with the cold, my friends in the construction industry on the dole, the flooding in Ballinasloe etc. One friend told me I was missing nothing, which was a bit chilling."

There are not many people who would leave a permanent, pensionable teaching job in Ireland during the depths of a recession.

But when David Joyce's South African fiancée could not get work here, he decided to do just that last September.

Originally from Lawrencetown, near Ballinasloe, Joyce now lives in North Riding, a suburb north of Johannesburg. He met his partner when they taught at the same school in London.

In 2007, they moved back to Ireland where he got a permanent post at a primary school in the village of Eyrecourt in Galway.

But work as a trainer with Fás and the local VEC dried up for his fiancée last year.

That, coupled with a 10% paycut for Joyce as a result of the government's pension levy on public sector workers, prompted them to decide that making the move to South Africa would be worthwhile.

He currently works teaching English to foreign students, which he enjoys in part due to the relaxed nature of the work.

"I couldn't get a job as a primary teacher unfortunately. It's tough to get work. Networking is everything down here, worse than Ireland even. If I didn't have a South African partner I wouldn't have a chance," he says. "On average, the working day starts earlier here, but everyone who can finishes early on a Friday [lunchtime]."

You can "never say never" when it comes to returning home permanently, but for now it is not on the agenda, Joyce says.

"The quality of life is so good and the country is truly beautiful," he says. "The only downside here is the political situation and the fact it is so far away from home, plus there is no security net for you if you fall which is very scary. If you fall, you fall hard in this country. That's why there are people begging at the traffic lights, blacks and whites. It makes you realise how wonderful the Irish welfare state truly is, no matter how much it costs."

Oran McGonagle, USA - 'I don't feel stuck in America but I definitely feel there is something pushing me away...'

'Coming from a small town in Donegal to living in a city like Boston is always going to be different... I would say the quality of life is better here, the drawbacks to that being that I miss my family and all my friends at home. But that is the price I have to pay."

Oran McGonagle (24), moved to the USA in June because there were "simply no opportunities in Ireland" for business and computing graduates such as himself.

Originally from Moville in Co Donegal, last year he took advantage of a new internship visa system which allows Irish graduates to spend up to 12 months working in America.

"When I finished my degree the only jobs available were ones where degree level was not required," he says. "Everybody was looking for experience and I could not get the chance to get any because of the downturn."

He now lives in an area of South Boston called Dorchester, where he works as an advertising and promotions manager for an Irish bar, The Banshee.

He found work relatively easily, he says, in no small part due to the recognition among American businesses that Irish graduates are of a high standard.

"Anyone I know who came here with a degree level qualification is doing very well for themselves and have opportunities for promotion," he says.

He says Dorchester, which has a strong Irish community, is "the way Ireland was before we had all the wealth. That community feeling is definitely alive in the Irish abroad.

"I have applied for a long-term visa now so I will not be heading back home in the foreseeable future.

"I don't feel stuck in America but I definitely feel there is something pushing me away from Ireland, which is a terrible feeling to have about your own country," he says.

"I feel Ireland needs to rectify the situation for graduates as quickly as possible. There are more and more young people landing in Boston every week.

"I was talking to an older emigrant who has been living here for years and he believes that the cycle has just begun again, from his generation coming here, to the new graduates landing. Which is a scary thought for Ireland."

Gina Galvin, Singapore - 'I looked at opportunities but there was very little choice... There was more of a pull to move abroad'

'Iwould like to return to Ireland for sure, I don't know when… [but] I would have to feel I am getting value for my money, for example buying a house should not be a frightening thought, taxes should be more attractive, public transport and roads should be improved."

When Gina Galvin (41) was offered the choice between taking redundancy or moving abroad with her company, TNT Express, she did not even consider coming back to Ireland and bringing her senior management skills with her.

There were simply not the opportunities for her here, while the price of property and the general state of the economy were other major disincentives.

"I looked at opportunities in Ireland but during the time of making my decision there was very limited choice, nothing in the salary range or in the same industry available, and nothing at the level I was looking for. There was definitely more of a 'pull' to move abroad," she says.

"I have family and friends in Donegal and all over Ireland and the feedback about returning was not good."

Having been based in Windsor in the UK for more than seven years, the Donegal native opted instead to relocate to Singapore last April, where her company now has its headquarters.

She currently works as a regional director for the company in the Asia Pacific region, and describes the change as "one of the best moves" she has ever made.

Among the major plus points for her are the low tax rates, the excellent 'ex-pat' social life, and the weather in Singapore.

"I do feel very sorry for the young trying to find work at home, especially my family and friends who have lost their jobs and there are no opportunities even on the horizon for them. Many feel insecure and have no confidence in the future," she says.

"In my opinion moving back to Ireland is a big risk. Everyone got greedy and prices increased, crime increased and there seemed to be no control over what was going on. I would like to move back to Ireland but I don't have great confidence in the economy nor am I willing to take the risk for a while yet."

Karl Stafford, Australia - 'I applied for financial work but ended up working as an orderly in the operating theatres of a large private hospital in Sydney'

'If I was to return to Ireland right now, I know there would be little or no chance of finding work in the financial sector. I don't know what I would do. I might consider doing a masters or something, I really don't know."

Dubliner Karl Stafford did not leave Ireland for Australia due to the recession – but the former AIB employee can't expect to return to a job in financial services here anytime soon.

Stafford (27) and his girlfriend Lydia Finnerty had been planning their round-the-world trip for a while before finally setting off on their travels in February 2008.

While there were tentative signs of a recession at the time, the sheer scale of what would transpire had yet to become known.

"We had decided we'd like to see the world before we got too old or too settled in our jobs. We planned a round-the-world trip which was originally six months in Asia, six months in Australia and six months in New Zealand and South America," he explains. "We both had a lot of savings and originally only planned to work in Australia for three or four months, then move on."

Stafford had gone straight into AIB after graduating college with a degree in international business and languages, and liked working there.

When they first arrived in Australia, they travelled around for a while before deciding to settle in Sydney.

"When I got to Sydney I started applying for financial work. But this was in the height of the financial crisis, and even though Australia didn't officially go into recession, businesses were very conservative about hiring people, especially people on working holiday visas," he says. "So I ended up working as an orderly in the operating theatres of a large private hospital in Sydney. Although the work itself was no fun, it was a great place to work and I made so many great friends there."

He is currently working on a contract basis for a large investment bank, and has a good mix of Irish, English and Australian friends. But he is aware that his options for returning home to Ireland are limited. His situation is further complicated by the fact that he can only stay in Australia if he is sponsored by his current employer. The clock is ticking for him as his current visa is due to expire in October.

"If I can't get sponsored before then, I'll have to leave Australia," he says. "I don't know if I'd stay here forever, I suppose if things picked up in Ireland and there were plenty of jobs a few years down the line then I would like to go back."

Aisling Reihill, New Zealand - 'I always wanted to go away. But I would have stayed at home if I had got a job'

When Aisling Reihill (23) graduated with a degree in physiotherapy from the University of Ulster last year, she already suspected the prospects of work at home were slim.

The British National Health Service was not hiring, and the situation south of the border was no better.

She arrived in New Zealand at the end of October and started work within a matter of days at a private practice based in Auckland.

Reihill says that one of the reasons the group chose New Zealand was because it is easier to be registered for work there than in Australia, where you usually need a company to sponsor your visa.

"I actually had the job set up before I arrived. I had got on the internet and sent my details to places which said they needed physios," she says. "There is a really good lifestyle here – the people are very laid back. It's a bit like at home. But there is also loads to do at the weekends, and, of course, there is the weather."

Since she and her friends arrived in New Zealand, several others from her class have followed suit.

Some of them have struggled to find work, however, amid increasing competition for posts.

"I planned to come out here for a year. I've been away six months and the job situation back home is not getting any better," she says. "I'm going to stay here for a year, and once I finish here, I can go straight to Australia, which I probably will do as the money is way better there.

"I'd say that, in the last year of college, I always wanted to go away. I don't know if that was because I knew the job situation was so bad or not. But I would probably have stayed at home if I had got a job.

"I definitely would like to move back home in the future but the jobs just aren't there at the moment."

Report - Tribune News.

See The New Zealand Report: How To Migrate, Live, Work Or Invest In New Zealand

Friday, 23 April 2010

Strangled By Mortgage Noose...

Being strangled by the monthly mortgage noose...

OVER the past number of weeks and months, we have become used to speaking in billions.

Seven billion to recapitalise AIB and Bank of Ireland; a €22bn cash injection into Anglo Irish Bank; €81bn worth of developer loans transferred to NAMA -- the list and amounts of money appear to be endless.

But for many, the only real amount that matters is the one they need to pay each month to keep a roof over their head.

Unfortunately, for tens of thousands of Irish families, this amount is far greater than their income and the mortgage rope around their neck simply gets tighter and tighter each month.

According to the Financial Regulator, more than 28,000 homeowners have not been able to repay their mortgage for more than three months. Another 30,000 have been forced to renegotiate their mortgages.

I suspect this figure of almost 60,000 is merely the tip of the iceberg and will only increase.

Considering that more than 230,000 people have been made unemployed in the past two years, the likelihood is that tens of thousands more homeowners are struggling to repay the mortgage at the expense of food, electricity, clothing and other basic necessities.

Many families are struggling to breathe and there is little light at the end of the tunnel.

We have already seen all of the major banking institutions increase interest rates in the past month and most have indicated that this will be the first of many such rises this year.

Most of these increases occurred as large developer loans were being transferred to NAMA. Many suspect that banks will now return to the business of banking -- that means more interest rate increases and more aggressive management of bad debts.

Under the Statutory Code of Conduct on Mortgage Arrears, banks cannot seek to repossess a property for 12 months after the first repayment is missed.

For many, however, that simply delays the inevitable as arrears, interest, penalties and bills accumulate with little prospect of ever being repaid. After that year has passed, there is no protection for homeowners and the gloves are off.

LAST year alone, the number of repossession orders granted by the High Court increased by 66pc. Worryingly, the majority of cases date back to 2007 and 2008 when the effects of this recession had not even hit.

A lot has changed since then. Rising interest rates, mounting arrears and negative equity mean that for many homeowners there simply is no way out.

So what assistance if any is available to those fighting to keep their home? Limited state assistance is available in the form of the Mortgage Interest Supplement -- a short-term support to help you pay the interest portion of your mortgage.

More and more people are availing of this supplement and the cost of it to the State increased five times in just two years to €60m in 2009.

However, for every homeowner accessing the supplement, another is being refused.

The Department of Social and Family Affairs is currently reviewing the scheme but it is now more important than ever that the supplement is made available to those in difficulty.

The Government has realised that urgent action needs to be taken to assist homeowners. An expert group is to return to the Government in June with a detailed set of proposals. But the fear is that for many families this will simply be too late.

We are all discussing the financial cost of helping people in mortgage trouble but little discussion has taken place with regard to the cost to society.

In time, we will see the real effects on people's physical and mental health and on family relationships. Anecdotally, we hear of more people suffering depression, higher numbers at risk of suicide and increased rates of marital breakdown.

There will be a cost to helping families and homeowners in difficulty -- but the longer-term cost of failing to act may be much greater.

Report by Aoife Walsh - Irish Independent.

Aoife Walsh is national communications officer with the voluntary housing organisation Respond.

Wednesday, 21 April 2010

Great Property Scam Rip Off...

The great property scam is back to rip us off again...

They're back! The creeps, the snake-oil salesmen and spoofers who condemned a generation to negative equity are cheerleading again.

The advertisers are salivating too because the "property porn" industry sees a chance to sell its fantasy again. The papers are once more displaying "dream homes" replete with doctored photographs and Mediterranean blue skies -- all at "knock down" prices. It's time to buy again, or so I'm reliably told by those who were so reliable last time that they gave us NAMA!

I am not saying that property won't recover ever, of course it will; but not from here. Irish property is still extortionately expensive. It is expensive not just on a comparative basis but, more crucially, it is expensive on the basis of what is happening in the economy. Any government that is urging people to buy houses right now clearly has no intention of learning anything from the mistakes of the past few years and therefore is condemned to repeat them -- with catastrophic results.

If you were a Martian economist and were asked to put together a blueprint for how Ireland can learn from this boom/bust travesty, the first point on the list would be that Ireland should try to 'lock in' the competitive gain that cheap property gives a country.

We should let property fall to a level that we can all afford and then start again. As well as a labour force that is willing and educated, low taxes and cheap land should be part of our competitive offering. In that way, we can afford to pay our workers more, because we are paying our landlords less.

But that isn't happening. And worse still, the property hoodlums are back on the street again. To have been ripped off by the property scamsters once is bad enough, to be ripped off twice is a travesty.

Buying a house now makes absolutely no economic, financial or social sense because prices are condemned to fall much further and anyone who buys now will be suckered into the false rally, known as a 'dead cat bounce'. Given what we now know about the boom, it's hard to feel sorry for someone who believes the hype-property brigade. But even a cursory glance at the financial numbers today -- just a little bit of due diligence -- suggests that we have a long, long way to go before house prices reach the bottom. So beware, see through the glossy brochures and don't say you weren't warned . . . again.

Here is the nub of the issue. The reason the property merchants are back is because over the past 24 months, Ireland has been turned from a democracy to a 'bankocracy'. A bankocracy is a country in which every major decision is taken to bolster the interests of the banks.

A democracy was one of those quaint ideas, like the notion that a state would be governed according to the interests of the citizens. In this 'bankocracy', because Irish banks can only be saved if the property market rises, the State will do everything in its power to extort cash from the citizen to give it to the banks via the property market one more time.

Everything the State has done so far has been to promote a bankocracy over democracy. It is far from clear why it is doing this. What is obvious is that the politicians who presided over this mess have no intention of learning from it. Initially, the guarantee -- which I was a supporter of -- was about containing the crisis. If you see a contagious bank crisis as a forest fire, doing nothing in the chaos of September 2008 and allowing the banks to go under would have been like a firefighter letting a forest fire blaze out of control, irrespective of what was burned in its wake. The State had to do something at the time.

However, the initial advice was to limit the guarantee to two years and then let it lapse. In this way, you could contain the crisis, see how bad the banks were and step back, giving the problem back to the banks and their creditors who had (a) caused it in the first place but also (b) are best placed to unravel it.

We are now being told that if we were to take the guarantee away now, the banks would collapse because of their funding difficulties. Well if a bank, as a business, can't survive without government support, then it ceases to be a proper business and should be given to a liquidator to get the best price for any assets it has. The deposits can be guaranteed, transferred and form the capital base of a new or existing bank and away we go. No old bank, no old problem.

But that is how a capitalist democracy works. However, Ireland is not a capitalist democracy; it is a cronyist bankocracy where the government has tied the interests of the citizen to the interests of the bankers with calamitous results.

The government believed the banks' hostage-taking stance. The banks claimed that they had a hostage called 'the economy' and that if the government didn't give them the cash they would pull the trigger and sink everything. Now that the hostage-takers have been rewarded with a huge ransom, we face a concerted effort to inflate the property market again. Having given 'cash for trash' via NAMA, the only way that the ransom can be validated is through inflating the market again. But it won't work. Prices will keep falling.

Look at the chart to see why. For the market in Ireland to clear, investors have to take up most of the slack. This means in people's heads they need to have a profit model, which validates why they are buying property. In the commercial world, the yield -- which is how much rent the property makes -- is the crucial barometer.

Let's say the yield on property has to be 7pc at least to make it worthwhile investing in property, then we can see with some clarity how much prices are still overvalued. The average cost of a house in Ireland is €250,000. The average rent per month is €863. This gives a paltry yield of 3.48pc per year. Now to get the yield up to 7pc, either rents have to double -- which is not going to happen because wages are falling, taxes rising, unemployment rising and emigration is back -- or prices have to fall. So average house prices must fall by another 45pc to reach fair value of €135,620. Unless prices fall back dramatically, you would be mad to buy because you would simply be paying the banks a subsidy on top of the tax you are going to pay to bail them out!

Another way of looking at how overvalued houses are is to examine the chart. The chart shows how much out-of-whack houses prices still are with respect to the average wage. Up until 1996, house prices and wages moved in tandem. After that, house prices moved out of synch. By 1999/2000 there was a clear bubble emerging and the rest is history. But as you can see, if rises in house prices are to get back to where they bear some relation to rises in wages, house prices have to fall back dramatically. In fact, to get back to a proper yield, house prices must tumble.

Anyone tempted to buy now should try to see through the spin that says: "Now is time to buy". But this shouldn't be that difficult. After all, who is saying that now is the time to buy? The sellers! Enough said.

Report by David McWilliams - Irish Independent

Friday, 16 April 2010

Demolition Of 'Ghost' Estates...

Cuffe backs demolition of some 'ghost' estates...

NEW GREEN Party Minister of State for the Environment Ciarán Cuffe yesterday said the blame for unfinished, or “ghost” housing estates lay with “the ‘cargo cult’ of rezoning for all the wrong reasons” that drove development in recent years.

In his first major speech since taking office last month Mr Cuffe said “selective demolitions will be a necessary part of the tasks required to tackle the legacy of one of the more unsavoury aspects of Ireland’s building boom”.

Addressing the annual conference of the Irish Planning Institute (IPI) in Tullamore, Co Offaly, he said: “I have no doubt that some loans that will come into the possession of the Nama will result in the demolition of badly designed buildings in inappropriate locations.”

But demolition would not be the only option.

“We now have to look quite realistically at the future use of unfinished estates and the needs of residents . . . It’s not as simple as sending in a bulldozer. That would happen in cases where there are significant health and safety issues,” Mr Cuffe said.

Nama’s new planning committee, which holds its first meeting today “will have a key role in this”.

Local authorities would also have “a strong role to play”, even in cases where Nama was involved, and so would the Department of the Environment.

He told planners that a team from the department would determine just how many unfinished housing estates there are. “We don’t yet have a clear figure, but hope to have that by the end of the summer,” he said.

As a “signed-up member of the institute” and former lecturer in urban planning, Mr Cuffe said his new role as Minister of State with special responsibility for planning, horticulture and sustainable travel “affords me an exciting opportunity to improve and enhance our planning system from within”.

IPI president Gerry Sheeran, in his opening address to the conference, said it was vital the advice of planners was “not ignored, as happened in the past” with the overzoning of land, which had led to the proliferation of unfinished housing estates.

“Decisions of councils to zone large amounts of lands, which in many cases were multiples of the development land required for the projected population, may have been seen at the time as benign and without negative consequences in the booming economy – but there are victims.

“These victims are those living in unfinished housing estates or those housed on land zoned in floodplains. The overzoning was not done in the interest of the common good but for sectoral interests, such as landowners and developers, and frequently against the advice of professional planners.”

Nama presented an opportunity for a plan-led rather than developer-led approach and should not be “driven by seeking the best return possible as had been the case during the boom.”

“Indeed, good planning can increase the value of land by achieving a better use mix or by providing public infrastructure such as public transport or can ensure the provision of social infrastructure such as schools, community facilities, parks and social housing in a timely and coherent fashion,” Mr Sheeran said.

Referring to recent flooding around the country, he said while climate change was playing a part, man-made interventions were also to blame – damage to bogs, short-sighted river drainage schemes, modern forestry techniques, large areas of Tarmac and concrete and the zoning of land in floodplains.

“The skills and talents of planners are essential to ensuring that we develop more sustainable, attractive and cohesive communities to live in, adopt more sustainable methods of travelling, build strong and vibrant town centres, address the issue of declining rural areas and enhance and protect our built and natural heritage.”

Costly Development Expert Outlines Problems Of One-off Housing Surge

ONE-OFF houses accounted for 46 per cent of the reduced national output of housing last year. But in some rural counties, mainly in the west, the proportion was much higher, according to an analysis by James Nix, of the Irish Environmental Network.

At the Irish Planning Institute’s annual conference in Tullamore, Co Offaly, he said one-off houses accounted for 80 per cent in Co Galway, followed by Kilkenny and Mayo (75 per cent), Leitrim (74 per cent), Roscommon (73 per cent) and Monaghan (71 per cent).

The fact that one-off houses accounted for almost half of the housing output nationally was due to the recent sharp drop in construction of scheme houses and apartments, rather than because of any surge in the building of one-offs, he explained.

Construction of apartments and scheme housing has plummeted, from 50,000 in the peak year of 2006 to less than 10,000 in 2009. The comparable figures for one-off houses were 22,800 in 2006, down to 12,000 of the total output of 26,400 units in 2009.

“While a small number of these homes will have been constructed near schools, shops and workplaces, the overwhelming majority are distant from services,” Mr Nix said. Since 2004, he estimated that it had cost “well over €1 billion” to provide them with services.

“This figure includes an additional €120 million on postal services and some €720 million on school transport. Other areas with substantially higher costs include road maintenance, bin collection, electricity and phone connections,” he told 150 planners at the conference.

Now, an increasing share of our housing output was more expensive to serve. “The slump in completions brings into view a key question for the 2010 to 2020 period: are close to half of all homes built in Ireland in the coming years going to be one-off?” he asked.

“Ireland’s competitiveness is being steadily eroded by the continued development of a pattern of housing which is particularly energy intensive,” Mr Nix warned the planners. “As oil prices rise, this cost burden will become ever more apparent.

“Put simply, unless dispersed development is restrained, councils will have to devote a disproportionate amount of their revenue on road maintenance, while bin collection and other council-provided services will also be more expensive,” he said.

This could be overcome by replacing stamp duty with a site value tax, as proposed in the revised Government programme. Such a tax would not only raise funds for cash-starved councils but would also act as a disincentive to hoarding land, he said.

Report by FRANK McDONALD - Irish Times

Thursday, 15 April 2010

Demolotion The Only Way...

Demolition the only way to build a better future...

WITH THE building frenzy of the last decade and a half, who would have thought that we would be thinking of knocking some of it down again? But Brendan McDonagh, chief executive of Nama, probably got it right when he talked about the need to demolish some of the surplus stock in out-of-the-way locations.

Everyone now knows that some of these estates will never be lived in, because they are not within easy commuting distance of jobs, or because there simply was never a market for them in the first place. It wasn’t just the bankers and the developers who got it wrong. The planners in the various local authorities have also made grave errors in allowing many of these estates to be developed in one horse towns and obscure villages.

These developments – many of them large executive-style homes – simply did not make sense, even in buoyant times. Some of them are now an eyesore, and could disappear even faster than it took to build them.

The same should apply to swathes of seaside developments in places like Lahinch, Achill, Bettystown and Courtown, where many of the owners can’t afford the luxury of a second home and can’t sell them on either. So much for the tax breaks that applied to these schemes in the early part of the boom. Now that they have run out for the most part, the mortgages still have to be paid monthly. Another daft idea of the era.

Don’t expect to see the wrecker’s ball out just yet. Like everything else in Nama, it takes months to formulate a policy and it is likely to be at least Christmas before the the demo men appear.

Report - Irish Independent

Tuesday, 13 April 2010

Best Cure Is Emigration ...

Cuts, tax and emigration the harshest medicine...

IT'S often been said that the best cure for poverty and unemployment is a job. But the reality of the modern Irish economy is that the best cure is emigration.

The Economic and Social Research Institute (ESRI) said yesterday that 100,000 people would leave Ireland this year and next, keeping a lid on already high unemployment and helping to relieve some of the budgetary pressures on the Government.

The loss of 100,000 mainly young people is hardly something to celebrate, but the reality is that without this safety valve the Irish economy would be mired in levels of unemployment last witnessed in the 1980s.

The ESRI calculated yesterday that if the amount of people in the labour market had not fallen over the last year via emigration, the rate of unemployment would be about 16pc not the current 13.4pc.

Ireland is shipping out its young people to countries like Canada, the US, Australia and the UK, thereby easing the pressure on the economy they are leaving behind.

Those departing are also easing the pressure on the Government in lower welfare costs and less political opposition. But the decisions of younger people are impacting on the economy in other ways too. For example, if they are not emigrating, younger members of the labour force are simply getting out of the jobs market entirely and returning to education.

There were 69,100 fewer people in the labour force in the fourth quarter of 2009 compared with a year earlier. More than half of this decline in numbers was accounted for by young people leaving the labour force, often for an educational opportunity.

However, having fewer workers chasing fewer jobs will only do so much for government economic planning. Stimulating or encouraging growth is also needed and the Government has only one real hope in that respect -- exports. The ESRI expects exports to grow by a very healthy 4.5pc next year as the world economy sidesteps a double-dip recession and trades its way out of the worst slump since the 1930s.

Export growth is important, but approximately 60pc of the Irish economy is powered by the consumer, who is heavily indebted. However, the ESRI believes the Irish consumer can shake off the debt shackles and increase private spending by 1.5pc in 2011.

This might seem strange when wages will still be dropping and interest rates more than likely rising thanks to the European Central Bank (ECB), but the ESRI was adamant yesterday that such a performance was possible.

A tighter monetary policy is probably the biggest threat to an Irish economic recovery and, while not emphasised too heavily yesterday, it is included in the quarterly report from the think tank. It envisages rates rising by 0.75pc in 2011 thanks to the ECB, but, of course, the scale of rate hikes won't be influenced by events here but by the big euro economies like Germany and France.

Rates remain something of an unknown variable, but the savings rate is equally something of a mystery. While the fear and risk aversion of 2008 and 2009 are no longer evident, the Irish population remains deeply scarred by recent economic turmoil and the precautionary savings remain high.

THE rate is likely to hover around 10pc of disposable income for some time, although Ireland's younger population should help the rate to ease in time. But ultimately forecasting the savings rate remains something of an inexact science.

The psychology of the Irish population remains deeply relevant to any recovery. Each one percentage point fall in the savings rate releases €1bn of private spending into the economy. But what makes people feel more confident?

Most economists would argue that a government getting on top of its budgetary problems certainly helps, but here the trends are less clear.

The Budget deficit will actually climb slightly in 2010 despite the spending reductions of last year. This is because taxation revenues are still falling and borrowing costs for the banks are also possible, even if the Government is trying to keep such borrowings to a minimum by using so-called promissory notes to fund Irish Nationwide and Anglo Irish.

The Government's long-term target is to get the Budget deficit back to 3pc of GDP. But nobody believes this is going to be easy, least of all the ESRI.

The organisation's highly-regarded research professor Alan Barrett yesterday refused to state categorically that the Government would get to the 3pc target demanded under the EU's Stability and Growth Pact, simply saying the Government's prospects were "uncertain".

The cuts in spending and the hikes in taxation will continue this year at a remorseless pace. Another €3bn will have to come out of the Budget, either in cuts or hikes.

The ESRI was slow to speculate on what precise measures were likely, but did speculate that €1bn in capital spending cuts were on the cards, supplemented by a property tax and further indirect tax increases.

This is going to be a very tough sell with a public already reeling from previous budgetary measures. The ESRI, like the Government, does not believe there is any other way to restore the budgetary balance.

However, Barrett agreed that previous attempts to balance the books, known as fiscal consolidations, were supplemented by devaluations of the currency.

That option is not open to us this time around because of euro membership, making the medicine the Government is administering even more unpleasant to swallow.

Report by Emmet Oliver - Irish Independent.

Sunday, 11 April 2010

Much Worse To Come?...

Don't bet your house on end of price falls...

Lenihan says we can buy in confidence now prices are realistic -- not according to some valuation models.

THE speed of the housing market crash is slowing, the house price report has suggested. It may be losing pace -- but contrary to Brian Lenihan's upbeat take on it, few people think that the market has bottomed out yet.

"The residential property market will now be stabilised at a realistic level," Mr Lenihan said after the 47 per cent Nama discount was announced. "You can now buy in confidence that the price is realistic."

The wider view is that prices could get a whole lot more realistic before they completely floor.

Is there much worse to come? By some calculations house-price values could have far further to fall. One internationally recognised valuation model reveals potential overvaluation in the Irish market of up to 60 per cent -- even after the massive price drops that have already occurred.

Dublin asking prices have dropped by up to 35 per cent from the 2007 peak, according to Daft, and nationally the drop has been 25 per cent.

Economists and others think the total tumble will stop at 50 per cent down from peak, but could it be more than that?

Very little is selling right now and more is piling on to the market. If not much is selling, then how the heck do you gauge realistic long- term value?

To try to get a handle on what housing might be worth now, we've looked at the different ways of pinning a value on this moving target.

Open market value

(What someone's willing to pay)

Bubble-era prices were dictated by what the market would bear, sheer supply and demand push. Post-property price crash, open market valuation has proved to have zero connection with long-term worth.

Comparison method

(What's next door worth?)

Another stalwart method pre-bubble. Not a scientific calculation, it's an educated guestimate based on comparing similar types of houses in the same area to get a price.

You're putting a three-bed semi in south Dublin on the market, you look at what the one down the road went for. it had a brand-new kitchen and bathroom so you dock €20,000 to factor in that, and so on, to arrive at a price.

In the new reality this rule-of-thumb method is more problematic.

A new model for new market realitIES?

(Price-to-rental income ratio)

The Economist magazine applied a version of this method in its major survey of prices in markets including Ireland's towards the end of last year.

It's based on the price-to-earnings (p/e) ratios used by stock market analysts to value companies. Just as shares are judged as expensive when their price-to-equity ratio is above its long-run average, house prices could be judged over-valued when the price-to-rents ratio runs high.

By The Economist's reckoning, the Irish market was still overvalued by at least 30 per cent in December.

A house price-to-income ratio value calculation used by chartered surveyors is to take the rental income potential of the property for one year, multiplied by a 15-year investment life span: 12 x months rental income x 15 years = property value.

Adjust for taxes, potential vacancy periods, repairs and rent fluctuations. The model stands up as a way of estimating value beyond the buy-to-let market.

Our application of this model (see panel) shows some property prices are still overvalued by up to 60 per cent.


(Rental yields)

Closely related to the model above, rental-yield income calculation was arguably one of the biggest red flags that property has been over-valued here. It looks at the return on investment from the rental yield a property would give, based on its current price.

For a property on the market with asking price of €200,000 and a rental income of €600 per month: (€600 x 12 gives €7,200 a year), this represents a yield of 3.6 per cent.

Though rent yields plummeted to unprecedented levels in the boom, buyers didn't care. Property prices were soaring ever higher and investors were confident of scoring big rewards from capital appreciation in the long run, which was madness, as any economist will tell you. And so it turned out to be.

"Rental yields across the economy are up but they're still well short of where you'd like to see it, at 5.5 to 6 per cent," said Davy economist Rossa White. They have risen from 3 per cent to around 4 per cent.

White was applying this approach in a report when he saw a problem in the market at the height of the boom. "Something does not feel right," he observed in a report in March 2006, where he noted that some Dublin house prices were heading for 100 times the rent earned.

House price affordability indices

Several respected indices gauge property values in terms of national household income.

The Demographia International Housing Affordability Survey covers 272 markets including the Irish one. House price is divided by gross annual median household income. Property prices are rated on a scale from 'affordable' to 'severely unaffordable'.

Its January study calculated that Ireland's market was still 'severely unaffordable'.

The EBS/DKM Housing Affordability Index measures the proportion of after-tax income a first-time buyer couple (FTBs) on an average income need to meet first-year mortgage repayments.

By its reckoning, affordability value is historically good for FTBs -- if they could actually get finance for a mortgage, that is.

The average working couple paid around 17 per cent of their net income to service a mortgage on the average house price in Q4, 1985, according to this index; while in Q1 1995 it was around 15 per cent. It's 13 per cent of income today, down from a high of 26 per cent at the peak in December 2006.


residual method

Used for property development and redevelopment purposes, it calculates whether a profit can be achieved on a development project.

The value of completed project, less total development costs, gives value of the property in its present condition.

A rough example: if the estimated sales price for a newly built property is €250,000 and the building costs amount to €150,000, the residual value of the site would be €100,000.

Other factors to be added to the mix included potential price appreciation or depreciation, taxes, interest and developer's profit margin.

If applied to several famous major developments built at the tail-end of the boom, this model showed certain projects were on seriously shaky ground from the very outset.

The cost approach

Based on estimating the replacement value of a property, value is calculated by adding the market price (compared to similar properties) of the land to the reconstruction cost of the building, less depreciation.

For example: €100,000 (land value) + €500,000 (replacement cost of building) - €75,000 (depreciation) = €525,000.

The obvious flaw is that the calculation takes you back to market comparison to get a market price, and it ignores the income-generating potential of the property.

Report by Roisin Burke - Sunday Independent.

Friday, 9 April 2010

Blow For Homeowners...

Blow for homeowners as BoI to hike mortgage rate...

BANK of Ireland will today reveal that it is increasing mortgage rates for thousands of hard-pressed homeowners.

The move comes despite the European Central Bank (ECB) leaving its rates unchanged yesterday -- for the 11th month in a row.

Homeowners who are vulnerable to rising mortgage rates are now being warned that they have seven days to act.

Experts are advising new buyers -- as well as those who are coming off a fixed rate or are on a standard-variable rate -- that they should lock in now.

Bank of Ireland (BoI) and its subsidiary, ICS -- which between them have one in four mortgages in the country -- are to announce that they are increasing their standard-variable rates for existing customers by 0.5pc. They are also raising fixed rates by up to 0.7pc for existing customers who want to fix, the Irish Independent has learned.

The change in the standard-variable rates will add €80 a month to the repayments of someone on a €300,000 mortgage as the standard-variable rate goes from 2.6pc to 3.1pc.

Over the course of a year, the higher cost will amount to almost €1,000. The new rates will take effect from next Friday, April 16.

Existing customers of ICS Building Society who want to fix for five years will now have to pay close to 5pc from the middle of April -- up from 4.25pc.

Fixing for five years will become €100 a month dearer, based on a €250,000 mortgage over 30 years.

EBS Building Society is set to follow Bank of Ireland's hike with rises within days in its standard-variable and fixed rates for both new and existing customers.

The move by BoI/ICS comes just a week-and-a-half after AIB increased its standard and fixed rates by 0.5pc. This newspaper revealed that AIB plans two further rises before the end of the year.

Permanent TSB has hiked its standard-variable rates twice since last summer, pushing them up by 1pc.

The moves by domestic banks to raise their mortgage rates for both new and existing customers -- other than those that are on trackers -- means that their rates are now coming up to the levels already charged by foreign-owned banks in the Irish market.

When the ECB began cutting rates at the end of 2008, most of the foreign banks failed to pass on all the cuts on standard-variable rate mortgages.

The ECB left its key interest rate unchanged at a record low of 1pc yesterday -- the same level it has been at since last May.

Economists said there was little prospect of any rise in the ECB rate before early next year. Those on tracker mortgages will therefore escape rises, as these are linked to the ECB rate.

The BoI variable loan-to-value rate is also going up by 0.5pc. New customers of BoI will see fixed rates rise by between 0.4pc and 0.5pc.

ICS rates are to rise by more. The variable loan-to-value rate will rise by 0.6pc from April 16.

For existing ICS customers, two-year and three-year fixed rates will rise by 0.55pc, but the five-year rate will go up by 0.7pc.


Both BoI and AIB have pushed up mortgage rates for existing and new customers, despite receiving €3.5bn each from the State. AIB needs an additional €7.4bn in capital and BoI needs a further €2.7bn.

It is understood that BoI will argue today that it is paying more to customers for deposits than it is receiving for mortgages, making its current mortgage pricing unsustainable.

The bank is adamant that it is supporting first-time buyers. It has lent €2bn in mortgages in the past year, with a third of this going to new buyers.

It is understood that of the 200,000 mortgages the BoI group has, some 60,000 are on standard variable rates.

Karl Deeter of Irish Mortgage Brokers said the move would push up the monthly cost for someone who has borrowed €250,000 over 25 years by €760 per year after tax.

"This comes in a year of cuts, levies, higher tax costs and deflation," he said. "It seems their greed knows no bounds."

The chief executive of the Professional Insurance Brokers Association, Diarmuid Kelly, warned that the better-value, long-term, fixed-rate mortgages were beginning to disappear.

He said: "There is a very short window of opportunity now for those seeking security around the level of their future mortgage repayments to act fast before the rates increase further."

And he warned that the risk associated with fixing for just two to three years was that people could leave themselves exposed to a large jump in repayments within a relatively short period of years.

Mr Kelly added: "Five years or longer at a value low rate is the optimum."

Report by Charlie Weston - Irish Independent

Wednesday, 7 April 2010

Sold Out To Neo-Gombeen Man...

Government has sold us out to neo-gombeen man...

Over 100 years ago, JM Synge described the gombeen man as follows, "groggy patriot/publican/ge-neral shopman who is married to the priest's half-sister and is a second cousin once removed of the dispensary doctor ... the type that is running the United Irish League anti-grazier campaign, while at the same time they are swindling the people themselves in a dozen ways and buying back their holdings and packing off whole families to America".

When we see the closing of businesses and the emigration of our neighbours and relations while deeply entrenched "insiders" disguise national robbery in the emotional language of patriotism, it is not difficult to conclude that the gombeen man never went away.

Even in terms of the detail of Synge's gombeen man buying up the peasants' holdings, it is obvious that, for NAMA to work, the State will have to trade land cheaply at some stage in the future. And guess what? To get the market going it will have to sell stuff at way below the price NAMA bought the stuff for in the first place -- that's how to generate liquidity. So like Synge's gombeen, the very people who caused the mess will be given the opportunity to buy the stuff back cheaply in a few years' time.

Let us examine the bailout of Anglo/NAMA through the prism of the late 19th century and early 20th century politics of rural Ireland -- where most of us came from. It is easy to see the direct link between the ways and wiles of the post-Famine gombeen man and the instruments and choices made by this Government.

We see the return of the gombeen tactic of saying one thing and doing quite another, terrifying the people into believing that we have no option but at the same time, setting aside €2.5bn in fees to make sure the gombeen's pockets are lined with silk despite the people's misery.

We are seeing not the return of the traditional gombeen but the emergence of his direct descendent, the neo-gombeen, who is a traditional gombeen hiding behind the international lexicon of high finance. The neo-gombeen thinks that if he uses the language of the 'Financial Times', as opposed to the 'Skibbereen Eagle', he can get away with it.

Given the pliant nature of the national reaction to the Anglo/NAMA business, the neo-gombeen's plan might seem to be working. But, in reality, it matters not a jot how many references the neo-gombeen makes to "bond market spreads", "basis points" or "rating agencies", the game is the same; the players are probably better dressed but that's about it.

In Parnell's Ireland, the traditional gombeen man thrived by lending money to the peasants, charging huge interest rates and when the peasant couldn't pay, the gombeen man repossessed his neighbour's holding and moved on to the next debtor.

A recurring feature of the post-Famine gombeen man was his willingness to put his fellow Irishmen in debt in order to make a few quid for himself and, more significantly, to please his foreign bankers who lent him the cash in the first place. Does this sound familiar?

Today we see a repetition of this pattern. The middlemen in Ireland who will make money from the bank bailout are salivating at the fees they are about to earn, and scaremongering the rest of us into believing that "there is no alternative". But of course there is.

Letting Anglo go bust is what free market capitalism is all about. Failure is punished and success rewarded -- these are the rules of free-market capitalism. It is about risk and return and a corporate default in Anglo wouldn't make one bit of difference to Ireland's creditworthiness. It wouldn't affect our reputation because we have no reputation to defend. In fact, a default in Anglo would signal that this is a proper capitalist country, not a "gombeen capitalist" country.

But even if neo-gombeenism wins, the victory will prove to be short-lived -- a sort of smart arse victory which has no substance. The reason is simple: the world has moved on. The rest of the world is getting on with creating wealth from new and viable businesses. This wealth generation is in direct contrast to the favoured method of the gombeen man, which is stroking a few quid from wealth that has already been generated. This is why it is so crucial for neo-gombeenism that the Irish status quo and land/credit/banking oligarchy remains intact.

Gombeen capitalism is never about generating new, real wealth from innovation, hard work and trade. It is about taking a cut. Central to it is land and property. If the gombeen can engineer an increase in the perceived value of land, then he can get a small slice and that prevents him having to go to work or trade.

Keep this in mind and think about the core contradiction at the heart of this Government's economic policy. On the one hand we have the deep-rooted gombeen capitalism of Anglo/ NAMA and on the other we have the ambitious, but achievable, "smart economy" idea.

The Anglo/NAMA strategy encourages what is called "rent seeking" in economics. This is where the professions see something that they can milk fees out of, and rather than create proper business, they trouser fees which ultimately come from the general public's taxes.

Therefore lawyers, accountants, stockbrokers, estate agents, valuers, senior civil servants and politicians are all behind the NAMA/Anglo stroke. As long as this structure stays in place, it replicates itself. It makes sense for the mammies of Ireland to urge their smart kids to join the professions, why wouldn't they?

Now contrast this with the smart economy idea, which -- at its purest -- is an effort to create a Silicon Valley here, where capital and brains come together to build a new economy.

But this takes money. The Government has said it will set aside €500m to help create this economy. This sounds like a lot -- until you think that it is putting 44 times more money into the Anglo black hole. So it is spending 44 times more to keep one fetid bank from the gombeen economy afloat than it is in trying to make this economy work properly.

Now, with the new education-based innovative economy in mind, think about how much of a competitive kick we could get for the money we are wasting in Anglo. There are 22 universities and third-level institutes in the country so they could get a billion each for a start. And they could get a thousand new professors working on research projects for 10 years. Now imagine going out and telling the world about that and see how much capital and expertise would flow in.

Or maybe we'd like to spend the Anglo swag on students. There are 146,000 full-time students here at the moment. So we could spend €38,000 per student; imagine what sort of education that would give them. Or what about spending some on early intervention in children's education? Or what about the new Science Gallery in Trinity? It cost €100m. We could build 223 of them all around the country. That's a possible future.

So who is going to win -- Old Ireland or New Ireland?

Report by David McWilliams - Irish Independent

Sunday, 4 April 2010

Double Dip Recession...

Two in five executives fear 'double dip' recession...

Almost 40 per cent of Ireland's top chief executives fear the country may face a "double dip" recession, according to the Sunday Independent Business Leaders Survey, a poll of Ireland's top 300 businesses.

Economists have suggested the recession may technically end this year, with modest growth pencilled in, as Ireland piggybacks on a global recovery. But this growth may be short-lived as spiralling public debts, shattered consumer confidence, rising unemployment and potential interest rate hikes drive the country back into recession.

The survey found that 39 per cent expected a "double dip", just ahead of 38 per cent of respondents who forecast that Ireland would escape a second recession. Almost 23 per cent were undecided.

The American Chamber of Commerce estimates that up to 40 per cent of Ireland's corporation tax comes from US subsidiaries based here, and, if the recession deepens in the US, exports from Ireland will be hit further.

The prospects for Ireland over the coming 12 months are grim according to the business elite, with only one in seven confident the economy will improve.

Brian Lenihan said last week in the Dail that "others believe in us; we must now begin to believe in ourselves", but it seems that the majority of Ireland's head honchos have long since stopped believing.

Of those polled, 43 per cent were either "negative" or "very negative" about our economic prospects, with almost as many unsure. A mere 14 per cent believed it was going to be a good year for the country and the economy, despite the tough year they had in 2009.

The threat of a "double dip" recession or "W-shaped recovery" was highlighted by top economist Nouriel Roubini, the man who predicted the financial crisis of the last three years. Along with Roubini, some economists believe global economies will decline again once the crutch of state bailouts and various stimulus packages are removed.

Report - Sunday Independent.

Thursday, 1 April 2010

Developers’ Castles Built Of Sand...

Developers’ castles may be built of sand as flood of debt rises...

And what of builders and property developers? There’s no doubt that these Celtic Tiger characters have taken a serious hit to their fortunes.

It may have completely wiped out large chunks of their wealth. We suspect that many are just treading water, but we really don’t know exactly how bad it is.

Firstly, we don’t know how much they have borrowed and how bad their land and assets are worth.

Development land in some parts of Ireland may have fallen by 95 per cent in value. This means that the banks — or rather Nama — owns it.

Crucially, we don’t know the level of personal guarantees given by the developers. If they have put everything on the line for a loan, they are toast. If not, they may still retain some shattered vestige of their former wealth.

How the likes of developer Johnny Ronan can blow €60,000 on a holiday in Morocco we honestly cannot imagine. But he must have made serious money in the good times — and one can only assume that it must have been ringfenced from any guarantees.

However, many builders did give vast personal guarantees, putting up their homes, artworks, horses, share portfolios and far more as collateral.

These property developers and builders made an awful lot of money during the good times. If they were wise, they will have diversified and squirreled away some of the profits or other investments in cash for the bad times. Only the mad or the stupid will have bet the entire ranch on the property market continuing to rise forever.


Ballymore Property’s Sean Mulryan was thought to be worth a tidy €600m back in 2008. When the downturn crashed into his property company, he sold off a stack of his beloved racehorses, dumped the helicopter and laid off large numbers of staff. He then mothballed a number of major building projects in Dublin and Manchester.

Anglo Irish Bank has secured a number of charges over Mulryan’s Ballymore assets, including some of its freehold and leasehold property and its stake in a Davy Hickey property vehicle based in the Isle of Man. Mulryan is one of the top ten borrowers, who are transferring an average of €1.6bn each to Nama.

We don’t know whether Mulryan has personal guarantees or whether the value of his loans is greater than his assets.


We never really had an accurate picture of the former tax inspector’s true wealth, although his personal stash was pegged at about €120m two year ago.

We knew he had gone on a blitzkrieg to buy some of the top pieces of real estate being sold in Ireland, UK, Europe and the US over the last decade.

In fact, Quinlan prided himself on paying top dollar for assets that included the €1bn Savoy Hotel Group, the €1.2bn Jury’s Inn business and the €1bn-plus Citigroup Tower in London. The tower was a personal investment costing close on €500m but largely funded by banks.

Commercial property fell by almost 50 per cent the year after he bought the tower, which must have hit his equity hard. There was also the €40m pad in Cap Ferat, houses on Shrewsbury and Ailesbury Roads, as well as a yacht and a slice of the Pirate Queen Broadway show.

Quinlan has moved to Switzerland, having stepped down from the helm of his Quinlan Private group which renamed itself Avestus.

It emerged that Quinlan’s loans were Nama-bound and that he was one of the top 10 borrowers in the country.

We do not know how much Quinlan is on the hook for personally. A smart man, it is likely that he ringfenced assets and wealth in the good times.


Delgany-based builder Edward O’Dwyer saw profits at homebuilder O’Dwyer Nolan tumble to €2.29m in 2009, with sales falling over 60 per cent. The company had total assets of €129m.

Related company Dwyer Nolan Homes had €35m in shareholders’ funds. Figures for 2009/2010 will be interesting as land values will become easier to read, but we’ve been very bearish.

The 66-year-old O’Dwyer has commenced operations in Hungary, which is probably as badly hit as Ireland.


Johnny Ronan’s turbulent relationship with model Glenda Gilson catapulted him off the business pages onto tabloid covers.

The high-profile row and “Gooliegate” saw him announce he was taking time away from his Treasury Holdings business.

The firm’s bank loans are Nama-bound, though Treasury says they are all performing fine. Then again, we don’t know the current value of the assets and liabilities.

In 2007, Ronan and his partner Richard Barrett were estimated to be worth over €395m.

Treasury indicates that it has 131 real estate projects with a combined value of €4.6bn. These are Treasury’s estimates and have not taken account of a collapse in property prices. Treasury also owns 67 per cent of REO, which is capitalised at nearly €74m but has over €1.2bn in debt.


In 2007, the docklands impresario was thought to be worth around €315m.

Crosbie owns large swathes of the riverside and is redeveloping the Point and Point Village. AIB bankrolled big chunks of the development.

Last year Crosbie was sued by partners Treasury Holdings over a €3m payment but he countersued, claiming he was owed €70m. It was settled out of court, with Crosbie describing it as a “lover’s tiff”.

He has just opened the Grand Canal Theatre, bringing the Russian State Ballet to the Dublin docklands.


Grehan was one of the biggest spending developers, splashing out €171m for the UCD vets school in Ballsbridge on a twoacre site. It has been used as a car park.

Grehan gave a personal guarantee to cover the interest on €110m worth of borrowings from AIB for the land. At one stage, his Glennkerrin Homes was valued, somewhat optimistically, at €600m.


The Lucan-based Menolly Homes owner is fighting the Revenue over a €20m VAT bill. Ross was the biggest homebuilder in Dublin, having built over 20,000 houses.

Menolly was thought to have had sales of €250m in 2006. This year about 10,000 homes — mostly one off buildings — will be constructed in the country. Close to 90,000 homes were built in 2006.

The Auditor’s report for Menolly Homes indicated that it made a loss in 2007.


The developer of the Dundrum shopping centre is set to be another of Nama’s top 10 clients. Dundrum shopping centre is seeking to hike rents by as much as 60 per cent in an upcoming rent review.

O’Reilly, who was valued at about €180m in 2008, lost close to €8m on Anglo Irish shares. The value of his property assets, including Dundrum, will have fallen sharply. But we don’t know how much he has borrowed.


Donegal’s Pat Doherty was valued at €375m just two years ago. The art nut and property magnate is developing the Titanic quarter in Belfast.

Most recent figures for his Harcourt Developments company show that it had net debts of €689m at the end of 2008, with shareholders funds of €133m.

It is just one company within the corporate structure, which holds other cash and assets.


Carlow builder Sean Dunne spent around €375m in 2005 assembling a chunk of land in Ballsbridge. The Sunday Independent carried a piece that weekend, branding the deal “madness”.

In February his bankers effectively took control of the properties. Accounts for his DCD Builders show that Dunne had given personal guarantees for over €100m in bank loans. The company estimated the ''recoverable value'' of its sites at €601.6m.

It had bank borrowings of €763m at the end of 2008. Dunne’s net worth was estimated to be around €103m in 2007.


One of the Anglo 10, who coughed up for some of Sean Quinn’s stake in the bank, McKillen is also set to be one of Nama’s top names, though he’s said to be resisting the transfer of some asset-backed loans.

McKillen, who owns the Jervis Centre as well as a stack of commercial and retail property in Dublin and the UK, also has interests in the Far East. We do not know his level of borrowings or if they exceed his assets. He was worth €137m in 2007.


Gerry Gannon recently landed a €20m 20- year contract to provide storage for the National Museum. One of the Anglo 10, he is also one of the Nama 10.

Latest figures for his Gannon Homes are three years out of date but showed the building firm had lost €13.65m in 2007, as sales halved.

The company had loans of more than €180m, some secured on land that was valued at €152m — in 2006. Two years ago, his wealth was pegged at €170m.


Galway developer Gerry Barrett owns a rake of hotels, including the G Hotel in Galway, Ashford Castle in Mayo and Jury's Inn in Limerick. He developed the €150m Scotch Hall retail centre in Drogheda, which opened as the economy tanked.

Two of his main firms, Edward Holdings and Radical, had net liabilities of €35m at the end of 2008, with auditors noting that it “may cast significant doubt” on the companies’ ability to continue as a going concern At the time, company directors were confident it had sufficient resources to operate for the foreseeable future

Report from The Sunday Independent.