Monday, 31 May 2010

Ghost Estates & Mirages...

Writing Ireland's wrongs...

Like buzzards picking over a carcass, foreign media is delighting in writing in-depth analysis pieces on our economic tribulations...The way they see us: we were once the landlords of the world; now ghost estates is where we're at.

Ireland may not be ablaze, but it is all the rage. Last Tuesday, the UK Guardian newspaper did a major feature on the once mighty, but now much lamented, Emerald Isle. The week before that both the Financial Times and the New York Times produced long articles on Ireland and the state it's in.

The headlines said it all. "Ireland's miracle – or mirage?"; "Ireland's shattered dreams"; "How bankers brought Ireland to its knees".

It immediately becomes obvious that these esteemed organs are not in pursuit of clues as to how the country produced Jedward or Crystal Swing.

Ireland has now become something of a laboratory for chin-stroking international journalists. Profiling the place is a piece of pie. Just google 10 things to write about Ireland five years ago. Dynamic, thrusting, Celtic thingamabob, Gerald Kean, champagne lifestyles, landlords of the world, Andrea Roche, bright shiny people, sunshine and more Gerald Kean.

Then google 10 things about Ireland now. Rain, economic collapse, angry, depressed people, ghost estates, debt, David McWilliams, Greece, Nama, doom and gloom and David McWilliams' upcoming stage show.

Once you've got those items together, feed them into a customised software package, mix in a little of your own politics, and bob's your uncle, out comes a brilliant critique of a morality tale for our times.

In the Guardian on Tuesday, the piece was introduced with a large photograph captioned: "Horses roam around an abandoned, unfinished home in Leitrim". If it wasn't for the blue skies in the background, you might be looking at a scene from the post apocalyptic movie, The Road.

The author, Patrick Barkham, took his life in his hands, deplaned from his flight at Dublin airport and walked the dangerous streets where mothers have now been reduced to eating their young.

He opened with the eviction last week of Anne Moore. She was described as a care worker who came off her 12-hour shift to find that she, her husband and three children were being evicted from their council house.

The scene was presented as if it was a day in the life of new Ireland. In reality, evictions by local authorities are as rare as hen's gold teeth, but the scenario provided a perfect launch pad for what was to follow.

Naturally, the author sought out David McWilliams' opinion. He thinks the Sean Bean is rightly Bhocht. In order to cast wide for the wisdom of sages, the Guardian writer also garnered a comment from Pat Ingoldsby, the Dublin- based street poet.

Pat opined: "Daily, I wander through my city with a trolley and a cardboard box full of dreams and I hear the crashing of other's people's jobs all around me. My most treasured possession is that I've got nothing to lose."

Back in the day when the thingamabob was roaring, they used to quote Joyce and Beckett to illustrate the imagination of the Irish. Now they parse the words of Pat Ingoldsby.

There is also the conflicting views of the economic sages. John FitzGerald of the ESRI is optimistic about the country's prospects, predicting a return to growth next year. McWilliams is then asked whether he'd concur. "That's horseshit," he replies.

Elsewhere, there are quotes from the ubiquitous and anonymous taxi driver and plenty about the Right To Work protest outside the Dáil a few weeks ago.

What comes across is that the author is intent on viewing the country through his particular political lens.

"For a decade, the Celtic Tiger was the poster-child of free market globalisation. Now, this bedraggled alley cat of an economy is neo-liberalism's favourite example of how to cut your way to recovery."

At the opposite end of the spectrum economists blogging in the New York Times have written a piece in a tone that suggests they would hold the bedraggled alley cat at arm's length with thumb and index finger.

Basket case

Peter Boone and Simon Johnson reckon Ireland is a complete basket case which should up sticks and leave the euro, like a good neo-liberal pet. They also give absolutely no credit to what was achieved in the country prior to the bubble.

"Simply put, the Irish miracle was a mirage driven by clever use of tax-haven rules and a huge credit boom that permitted real estate prices and construction to grow quickly before declining ever more rapidly." Such an analysis ignores the export-led boom that raised living standards all the way up to 2001.

A balanced view of how we are viewed from beyond these shores is available from the Financial Times feature of two weeks ago. How bankers brought Ireland to its knees is an accurate portrayal that manages for the most part to avoid patronising digs. For the most part.

A great story

"Twenty years ago, any Irish man or woman would be fluent in EU lore, from the number of scholarships available to the precise value of Brussels regional aid," David Gardner writes.

"Ten years ago, they became encyclopaedic on property prices, and a storehouse of tips for buzzy holidays from Barcelona to Bangkok. Now, they enumerate toxic assets like a loss adjuster. 'That building there, it's just been Nama-ed,"' said one resident, pointing to one of Dublin's best-known hotels."

It is inevitable that the fascination will persist. If the country goes down the tubes, it will be a great story. If the country turns itself around, it will be a great story. The rapid rise and the steep fall, combined with folksy notions about the Emerald Isle, has rendered it easy meat for the foreign media.

There is also the feeling in some recesses of Old Blighty that it's no harm to see that John Bull's uppity other island is now being put back in its box.

Report by Michael Clifford - Tribune News.

Sunday, 30 May 2010

Nama: The Truth...

Nama: the truth it's a bailout for developers...

The National Asset Management Agency (Nama), which was set up to cleanse the banking system of toxic debts, has been revealed to be solely a bailout for builders and developers.

The stark truth of the agency's core objective emerged this weekend as the Government's banking strategy lurched towards outright nationalisation.

The deepening crisis in European stock and currency markets forced the Educational Building Society (EBS) into state control as it failed to find private investors, and now market analysts say that AIB, the country's largest bank, will be effectively nationalised by the end of the year.

The unravelling of the Government's banking strategy -- which was designed to avoid nationalisation -- came as Frank Daly, the chairman of Nama, announced that its "core objective will be to recover for the taxpayers whatever it has paid for the loans in addition to whatever it has invested to enhance property assets underlying those loans. It is expected that Nama will have a lifespan of seven to ten years and when it has achieved its core objective, it will be wound up".

Nama will buy loans worth €81bn from Ireland's main banks, but will pay just over €43bn for those loans. Mr Daly's comments suggest that the borrowers -- including the 10 largest property developers who owe a staggering €16bn -- will be expected to repay half of what they owe.

Mr Daly said that due diligence by his staff had discovered remarkable flaws in the legal agreements that developers had signed to secure their loans. He said that "much of this lending was carried out in haste and inadequately secured and documented", making it difficult to pursue developers for the personal guarantees that many had offered to secure their loans.

In effect, Nama has become the bailout for developers that the Government always claimed that it would not be.

The creeping nationalisation of Ireland's banking also represents a major reversal of government policy. The latest bailout of the struggling EBS will cost taxpayers €875m -- €100m for a controlling stake in the company and a further €775m to cover its losses and repair its balance sheet.

The move follows the nationalisation of Anglo Irish Bank last year and the effective nationalisation of the Irish Nationwide Building Society this year. The State also holds large minority stakes in AIB and BoI, plus warrants that could convert into a further 25 per cent holding in both banks, and is expected to increase its holdings further if they also fail to secure outside financing to meet rules on the reserves that they must hold against future losses.

While market analysts expect BoI to keep the State at arm's length, AIB is likely to be majority State-owned by the end of the year. Of the six independent banks guaranteed by the State in September 2008, only Irish Life & Permanent is now free of State investment or control.

BoI managed to raise €1.5bn by issuing new shares at a deep discount to its existing shareholders this month and got the deal away just before the markets crashed. AIB faces the prospect of raising €7bn, but the total value of the bank on Friday was just over €900m.

"It just can't be done in these conditions," said one investment manager yesterday. "AIB will be nationalised unless there is a dramatic and unlikely recovery in the stock markets this summer."

EBS's failure to secure outside investment was not unexpected as its hopes of staying independent were effectively dashed by the chaos in the financial markets caused by the collapse of confidence in the euro and the failure of a Spanish regional bank.

But the EBS's inability to raise cash represents another blow for the Government's policy, which was meant to avoid nationalisation of the banking sector.

The Government has pumped tens of billions into the banks to keep them solvent and is raising another €40bn to buy their property loans through Nama.

Even though his building society has just received a €100m bailout from the taxpayer, EBS chief executive Fergus Murphy believes there can be no Nama-style rescue for distressed mortgage holders.

"I don't think it's workable. I don't think it's there. I think moral hazard would make it very, very difficult. I don't currently see that structurally as something that could happen. Banks need to fund their balance sheets," Mr Murphy told the Sunday Independent when asked about the issue on the margins of his society's AGM last Friday.

The EBS chief's response is sure to anger the thousands of homeowners struggling to meet their monthly repayments in the face of falling wages, rising interest rates and the ever-present threat of redundancy.

According to the latest statistics, 33,321 mortgage accounts -- 4.1 per cent of all private residential mortgages in the State -- were in arrears for more than 90 days at the end of March. Total arrears for these distressed mortgages amount to €464.5m.

Report by Alan Ruddock and Ronald Quinlan - Sunday Independent.

Wednesday, 26 May 2010

Irish Debt To Eclipse Greece...

Burden of Irish debt could yet eclipse that of Greece...

OPINION: What will sink us, unfortunately but inevitably, are the huge costs of the September 2008 bank bailout...

IT IS no longer a question of whether Ireland will go bust, but when. Unlike Greece, our woes do not stem from government debt, but instead from the government’s open-ended guarantee to cover the losses of the banking system out of its citizens’ wallets.

Even under the most optimistic assumptions about government spending cuts and bank losses, by 2012 Ireland will have a worse ratio of debt to national income than the one that is sinking Greece.

On the face of it, Ireland’s debt position does not appear catastrophic. At the start of the year, Ireland’s government debt was two- thirds of GDP: only half the Greek level. (The State also has financial assets equal to a quarter of GDP, but so do most governments, so we will focus on the total debt.)

Because of the economic collapse here, the Government is adding to this debt quite quickly. However, in contrast to its inept handling of the banking crisis, the Government has taken reasonable steps to bring the deficit under control. If all goes to plan we should be looking at a debt of 85 to 90 per cent of GDP by the end of 2012.

This is quite large for a small economy, but it is manageable. Just about. What will sink us, unfortunately but inevitably, are the huge costs of the bank bailout.

We can gain a sobering perspective on the impossible disproportion between the bailout and our economic resources by looking at the US. The government there set aside $700 billion (€557 billion) to buy troubled bank assets, and the final cost to the American taxpayer is about $150 billion. These sound like, and are, astronomical numbers.

But when you translate from the leviathan that is America to the minnow that is Ireland, it would be equivalent to the Irish Government spending €7 billion on Nama, and eventually losing €1.5 billion in the process. Pocket change by our standards.

Instead, our Government has already committed itself to spend €70 billion (€40 billion on the National Asset Management Agency – Nama – and €30 billion on recapitalising banks), or half of the national income. That is 10 times per head of population the amount the US spent to rescue itself from its worst banking crisis since the Great Depression.

Having received such a staggering transfusion of taxpayer funds, you might expect that the Irish banks would now be as fit as fleas. Instead, they are still in intensive care, and will require even larger transfusions before they can fend for themselves again.

It is hard to think of any institution since the League of Nations that has become so irrelevant so fast as Nama. Instead of the resurrection of the Irish banking system we were promised, we now have one semi-State body (Nama) buying assets from other semi-states (Anglo) and soon-to-be semi-States (AIB and Bank of Ireland), while funnelling €60 million a year in fees to lawyers, valuers and associated parasites.

What ultimately matters for national solvency, however, is not how much the State invests in its banks, but how much it is likely to lose. It is alright to invest €70 billion, or even €100 billion, to rescue your banking system if you can reasonably expect to get back most of what you spent. So how much are the banks and, thanks to the bank guarantee, you the taxpayer, likely to lose?

Let’s start with the €100 billion of property development loans. We’ll be optimistic and say the loss here will be one-third. Remember, Anglo has already owned up to losing about €25 billion of its €75 billion portfolio, so we have almost reached that third without looking at AIB and Bank of Ireland. I think the final loss will be more than half, but we’ll keep with the third to err on the side of optimism.

Next there are €35 billion of business loans. Over €10 billion of these loans are to hotels and pubs and will likely not be seen again this side of Judgment Day. Meanwhile, one-third of loans to small and medium enterprises are reported already to be in arrears. So, a figure of a 20 per cent loss again seems optimistic.

Finally, we have mortgages of €140 billion, and other personal lending of €20 billion. Current mortgage default figures here are meaningless because, once you agree a reduction of mortgage payments to a level you can afford, Irish banks can still pretend that your loan is performing.

Banks in the US typically get back half of what they loaned when they foreclose, but losses here could be greater because banks, fortunately, find it hard to take away your family home. So Irish banks could easily be looking at mortgage losses of 10 per cent but, to be conservative, we will say five.

So between developers, businesses, and personal loans, Irish banks are on track to lose nearly €50 billion if we are optimistic (and more likely closer to €70 billion), which translates into a bill for the taxpayer of over 30 per cent of GDP. The bank guarantee may have looked like “the cheapest bailout in the world, so far” in September 2008, but it is not looking that way now.

Adding these bank losses on to the national debt means we are facing a debt by late 2012 of 115 per cent of GDP. If we are lucky.

There is more. The ability of a government to service its debts depends on its tax base. In Ireland the proper measure of tax base, at least when it comes to increasing taxes, is not GDP (including profits of multinational firms, who will walk if we raise their taxes) but GNP (which is limited to Irish people, who are mostly stuck here). While for most countries the two measures are the same, in Ireland GDP is a quarter larger than GNP. This means our optimistic debt to GDP forecast of 115 per cent translates into a debt to GNP ratio of 140 per cent, worse than where Greece is now.

And even this catastrophic number assumes that our economy does not contract further. For the last two years the Irish economy has not been shrinking, so much as vaporising. Real GNP and private sector employment have already fallen by one-sixth – the deepest and swiftest falls in a western economy since the Great Depression.

The contraction is far from over, to judge from the two economic indicators I pay most attention to. Redundancies have been steady at 6,000 per month for the last nine months. Insolvencies are 25 per cent higher than this time last year, and are rippling outwards from construction into the rest of the economy.

The Irish economy is like a patient bleeding from two gunshot wounds. The Government has moved competently to stanch the smaller, budgetary hole, while continuing to insist that the litres of blood pouring unchecked from the banking hole are “manageable”.

Capital markets are unlikely to agree for much longer, triggering a borrowing crisis for Ireland. The first torpedo, most probably, will be a run on Irish banks in inter-bank markets, of the sort that sank Anglo in 2008. Already, Irish banks are struggling to find lenders to leave money on deposit for more than a week.

Ireland is setting itself up to present an early test of the shaky EU commitment to bail out its more spendthrift members. Probably we will end up with a deal where the European Central Bank buys Irish debt and provides continued emergency funding to Irish banks, in return for our agreeing a schedule of reparations of 5-6 per cent of national income over the next few decades.

To repay these reparations will take swingeing cuts in spending and social welfare, and unprecedented tax rises. A central part of our “rescue” package is certain to be the requirement that we raise our corporate taxes to European levels, sabotaging any prospect of recovery as multinationals are driven out.

The issue of national sovereignty has for so long been the monopoly of republican headbangers that it is hard to know whether ordinary, sane Irish people still care about it. Either way, we will not be having it around much longer.

We have long since left the realm of easy alternatives, and will soon face a choice between national bankruptcy and admitting the bank guarantee was a mistake. Either we cut the banks loose, or we sink ourselves.

While most countries facing bankruptcy sit passively in denial until they sink – just as we are doing – there is one shining exception: Uruguay. When markets panicked after Argentina defaulted in 2002, Uruguay knew it could no longer service its large external debt. Instead of waiting for a borrowing crisis, the Uruguayans approached their creditors and pointed out they faced a choice.

Either they could play tough and force Uruguay into bankruptcy, in which case they would get almost nothing back, or they could agree to reduce Uruguay’s debt to a manageable level, and get back most of what they lent. Realising Uruguay’s problems were largely not of its own making, and that it had never stiffed its creditors in the past, the lenders agreed to a debt restructuring, and Uruguay was able to return to debt markets within a few months.

In one way, our position is a lot easier than Uruguay’s, because our problem is bank debt rather than government debt. Our crisis stems entirely from the Government’s gratuitous decision on September 29th, 2008, to transform the IOUs of Seán FitzPatrick, Dermot Gleeson and their peers into quasi-sovereign instruments of the Irish state.

Our borrowing crisis could be solved before it even happens by passing the same sort of Special Resolution legislation that the Bank of England enacted after the Northern Rock crisis. The more than €65 billion in bonds that will be outstanding by the end of September when the guarantee expires could then be turned into shares in the banks: a debt for equity swap.

We need to explain that the Irish State has always honoured its debts in the past, and will continue to do so. However, the State is a distinct entity from its banks and, having learned the extent of the banks’ recklessness, we now have no choice but to allow the bank guarantee to lapse and to share the banks’ losses with their bondholders. It must be remembered that when these bonds were issued they had no government guarantee, and the institutions that bought them did so in full knowledge that they could default, and charged an appropriate rate of interest to compensate themselves for this risk.

Freed of the impossible bank debt, the Irish State could concentrate on the other daunting problems left by its decade-long credit binge: unemployment, lack of competitiveness and indebted households. The banks would be soundly capitalised and able to manage themselves free of political interference.

There are two common objections to sharing the banks’ losses with their bondholders, both of them specious. The first is that nobody would lend to Irish banks afterwards. However, given that soon nobody will be lending to Irish banks anyway, this is not an issue. Either way, the Irish State and banks are facing a period of relying on emergency funding. After a debt-for-equity swap, Irish banks, which were highly profitable before they fell into the clutches of their current “management”, will be carrying little debt, making them attractive credit risks.

The second objection is that Ireland would be sued in every court in Europe. Again wrong. Under the EU’s winding-up directive, the government that issues a bank’s licence has full power to resolve the bank under its own laws.

Of course, expecting politicians to sort out the Irish banks is pure fantasy. Like their British and American counterparts, Irish politicians have spent too long believing that banks were the root of national prosperity to understand that their interests are frequently inimical to those of the rest of the economy.

The architect of Uruguay’s salvation was not one of its politicians, but a technocrat called Carlos Steneri. The one positive development in Ireland in recent months is that control of the banking system has passed from the Government to similar technocrats.

This transfer did not take place without a struggle – one that was entirely missed by the media. When Anglo announced they wanted to take over Quinn Insurance despite the objections of the Financial Regulator, journalists seemed to view this as just another case of Anglo being Anglo. They should have remembered that Anglo cannot now turn on a radiator unless the Department of Finance says so, and what was going on instead was a direct power struggle between the Financial Regulator and the Minister for Finance.

Having been forced to appoint a credible Financial Regulator and Central Bank governor – first-rate ones, in fact – the Government must do what they say. Were either Elderfield or Honohan to resign, Irish bonds would straight away turn to junk.

Now you understand the extraordinary shift in power that lay behind the seeming non-headline in this newspaper last month: “Lenihan expresses confidence in regulator”.

The great macroeconomist Rudiger Dornbusch observed that crises always take a lot longer to happen than you expect but, once started, they move with frightening rapidity. Or, as Hemingway put it, bankruptcy happens “Slowly. Then all at once.” We can only hope that the Central Bank is using whatever time remains to us as an independent State to devise an intelligent Plan B – or is it Plan C?

Report by Morgan Kelly - Irish Times

Tuesday, 25 May 2010

Buyers Not Tempted By Cheaper Houses...

First-time buyers are still not tempted by cheaper houses...

HOUSES are now more affordable than they have been in a generation -- but few first-time buyers are tempted to buy, new figures show.

House prices have fallen so sharply that it takes just more than 12pc of an average first-time-buyer couple's income to repay a mortgage, the EBS/DMK housing-affordability index shows.

But despite the continuing drop in affordability, the number of new buyers jumping on the property ladder is a fraction of the level it was during the housing boom.

National average house prices are still falling and are predicted to drop below €140,000 over the next year.

A major reason for the lack of demand in the housing market is the continuing falls in rents.

Another set of figures released by yesterday showed that rents fell again in the past few months, as there is a glut of rental properties.

The latest housing-affordability index found that the average first-time house-buyer couple are paying 12.6pc of their joint income in mortgage repayments, compared with 26pc three years ago.

The index shows that the average new-buyer couple were paying €644 a month in mortgage repayments in April.

This is down from €1,323 a month that the same couple would have paid at the height of the boom in December 2006.

Economist Annette Hughes of DKM Consultants said affordability was at its highest level in a generation.

She said average house prices had fallen from a peak of €360,000 in December 2006 to just under €200,000.

However, she predicted that the average price nationally would come down to less than €140,000 over the next year.


The affordability index measures the proportion of after-tax income required to meet first-year mortgage repayments for an 'average' working couple -- each on average earnings and with a 90pc mortgage.

It takes into account mortgage rates, changes in the level of mortgage-interest relief and is based on average earnings and average first-time-buyer new house prices.

Recent figures from the Irish Banking Federation showed that just 2,300 first-time buyers took out mortgages in the first three months of this year.

This compared with almost 10,000 first-time buyers taking out a mortgage in the autumn of 2006, when the housing market was ballooning.

Mortgage brokers said yesterday that new buyers were finding it almost impossible to get approval for a mortgage.

Chief executive of the Irish Brokers Association, Ciaran Phelan, said it "has never been more difficult to get a mortgage in the Irish market."

He said new buyers were being deterred from buying by lenders demanding that they have a large deposit.

Meanwhile, figures from property website yesterday indicated that residential rents fell by 0.5pc in the first three months of this year, with the average nationwide rent now standing at €760 per month.

Rents in Dublin have fallen by 14pc in the past year, by 12pc in Cork and by 13pc in Limerick. Ronan Lyons, an economist with Daft, said there were signs that the rental market was stabilising.

Report by Charlie Weston - Irish Independent

Sunday, 23 May 2010

Struggling Homeowners...

Struggling homeowners turn to SVP...

Under-pressure homeowners are using every last cent to pay their mortgage bills, leaving them so short of cash they are turning to the Society of St Vincent de Paul for extra money to buy food and pay utility bills.

In the capital, St Vincent de Paul volunteers dealt with a massive 10,000 calls in the first four months of this year -- up 30 per cent on 2009.

Now they fear there will be a further raft of people in trouble with their mortgages when redundancy payments given to people who lost their jobs last year run out.

According to ratings agency Moody's, the number of Irish people who have fallen behind in their mortgage repayments has come close to doubling in the last 12 months.

The rate of delinquency in mortgage repayments -- those with more than 90 days of mortgage arrears -- rose to 3.8 per cent in March up from 2.1 per cent during the same month last year.

According to John Monaghan of the St Vincent de Paul Society, more and more people are seeking help because they are struggling to keep their home.

"They are using all their available money to meet their monthly mortgage bill, which means they cannot afford the basics like food and fuel.

"This is a country-wide phenomenon. Our conferences are helping people with food, with keeping children in school with books and uniforms," Mr Monaghan said.

"We have seen a 30 per cent increase in people coming to us overall. The two most frequent requests we are getting are people seeking help to buy food and to keep the lights on and the house warm."

He said that when this happened, the Society sat down with the householders and talked to them about getting in contact with their lenders and the Money Advice and Budgeting Service (Mabs).

"We are finding that when they get in these dire straits, people panic and don't think about going to the lender. We say to them: 'Look we are with you, we are not going to abandon you. We cannot help you pay your mortgage but we will look after the other bits and pieces. What you have to do is to take control of this process and contact the lenders and try to come up with some kind of deal'," he said.

He added that the main financial institutions who were part of the moratorium on house repossessions had been generally amenable to negotiation.

He noted that there had been a recommendation from the Law Reform Commission that other institutions like sub-prime lenders and Credit Unions be included in the moratorium initiative and he supported this call. "What St Vincent de Paul is trying to do for these people is to keep life ticking over as normally as possible."

He said the Society thought there would be more people seeking assistance, but redundancy payments and a moratorium on repossessions had helped families get by.

"However, we believe there will be an increase in the number of people in trouble.

"One of the things that we are concerned about is that many people are on Job Seeker's Benefit. That lasts for nine months to a year and as soon as that goes, they will find that whatever they get from the dole will be means-tested.

"That is when people start coming to us, when they are struggling to get a social welfare payment and their income drops drastically and they cannot afford to keep things going on the home front," Mr Monaghan said.

Meanwhile, Senator Marc MacSharry and other members of the Prevention of Family Home Repossessions Group last week presented new proposals to the Expert Group on Mortgage Arrears and Personal Debt, which was set up by Finance Minister Brian Lenihan.

Report by JEROME REILLY - Sunday Independent

Tuesday, 18 May 2010

Ghost Town...

Too many estates in the capital have been left in a mess after developers pulled out...

THE Government is being called on to change derelict site legislation to prevent vacant Nama land turning into a new generation of eyesores.

The call comes as it emerged that there are over 3,700 unfinished houses in developments in south Co Dublin alone.

Councillors have backed a motion seeking a review of the laws and a redress of the balance "between the interests of developers and local communities".

It was brought before a meeting of the council by Cllr Dermot Looney (Lab), who said the existing legislation favoured developers who had been allowed to leave behind ghost estates and "other kips" after the property crash.


At the same meeting it emerged that South Dublin County Council has 3,789 houses in 23 developments that have not been completed. The council will now write to the Minister for the Environment, Heritage and Local Government, John Gormley, to carry out the review.

"I think it is time considering the likely dereliction of vast swathes of Nama land," Cllr Looney said.

He pointed to local examples of derelict land -- such as the former McHugh's shopping centre site at Greenhills, Tallaght.

"We are left with the neglect, the eyesore, the dumping and the rats," he said. "Up until recently we also suffered vast scrawls of graffiti, an unsecured entrance, antisocial behaviour within the site and the danger of bonfires at Hallowe'en. This council called for the provision of a brick wall at the site. Instead, the developer threw up a few sheets of MDF hoarding in a job that would make a cowboy builder blush."

Cllr Looney said the existing legislation -- the 1990 Derelict Sites Act -- had failed "miserably" to protect communities.

"The legislation is clearly pro-developer and anti-community," he said.

A council spokesman told the meeting the council had a number of actions open to it and had taken action several times. He pointed out that some sites were cleaned up, only to be as bad "as they were on day one" a month later. "We don't have the resources to even contemplate (compulsory purchase) of these lands," he said. "We will be taking all action open to us under the legislation."

Figures on the numbers of unfinished homes were released following a question from Cllr Caitriona Jones.

It council said it defined as "unfinished", developments that had not yet been taken in charge by the council and where there were works still to be carried out that were the responsibility of the developer. The largest of the unfinished developments is the 588-unit Carrigmore at Fortunestown, built by Devondale Ltd.

The road has yet to be taken in charge, with resurfacing needed and an inspection by the council to be arranged.


The next largest is Kelland Homes Ltd's huge Sundale development in Tallaght.

In this development, services have not yet been taken in charge even though the road was, in 2004. The council said a drainage survey and revised drawings had been resubmitted. At Mill Race in Saggart, a mixed residential scheme of mostly private housing built by Neville Development Partnership, construction is nearly finished. The council said it was inspecting work on a regular basis.

A remedial list has been prepared and issued for McInerney Construction's 292-unit Hansted development in Lucan, with a final inspection of works due.

At 290-unit Beechdale, in Ballycullen, the developer has been on site in recent weeks completing works following the council's actions.

Report by Andrew Phelan - Evening Herald.

Saturday, 15 May 2010

House prices Must Drop 40pc...

House prices must drop 40pc to restore investor confidence...

PROPERTY prices need to fall by about 40pc or by around €100,000 before it would make sense to consider investing in houses, a report from Irish Mortgage Brokers and an academic indicates.

House prices in Dublin need to fall from €283,800 to around €179,000 for property to be a good investment.

Similar percentage falls are needed in Cork and Galway, the report by financial adviser Karl Deeter and lecturer Frank Quinn says. "Our calculations indicate that from an investor perspective the time has not yet arrived for a confident return to property for investment," the 'Residential Property Investor Report' says.

Asking prices for a house in Cork of €248,000 need to fall to €141,000, while prices in Galway need to drop from €235,000 to around €141,000.

The report concludes that "over-valuation is still the dominant characteristic of the Irish residential property market".

The report adds: "Falling rents, declining property prices and changes in both lending and taxation policy have brought enthusiasm and confidence in the property sector to all-time lows."

Oversupply of housing in the market is a major issue, it stressed.

But the study goes on to point out that property "may be hibernating, but it isn't dead".

Investors who use sound valuation methods, are considerate of financing costs, and get good professional advisers may be able to profit from property over the long term.

Report Charlie Weston - Irish Independent

Thursday, 13 May 2010

Government’s Mortgage Failure...

Property investor...

The Government’s €500 million plan to provide mortgages to those turned down by the banks is a failure....

A PLAN, sponsored by the Government, to make it easier for first-time buyers to get mortgages has flopped because of stringent qualifying conditions and needless bureaucracy.

Towards the end of 2008, when the mortgage market began to dry up because of the banking crisis, the Department of the Environment was portrayed as rushing to the rescue of young workers unable to get funding from the banks and building societies.

The €500 million mortgage plan announced by Minister for the Environment John Gormley was seen as a serious alternative for those anxious to get on the property ladder.

The grand plan, promoted as the Home Choice Loan, has turned out to be a “No Choice Loan”. The difficulties in complying with the terms has meant that, almost 18 months after the launch of the scheme, only three people in the entire country have managed to draw down mortgages (each of them for less than €285,000) from the vast fund.

Even with the poor response, the Department has so far failed to make any radical changes in the qualifying conditions to meet consumer needs. To get a loan, applicants have to earn in excess of €35,000 and more than €45,000 in the case of a couple. More importantly, they need to show that they have been refused mortgages by two banks or building societies.

Having to provide evidence of two rejections by financial institutions will always mean that the number of applications making it through to the Government scheme will be on the low side.

Not surprisingly, mortgage expert Frank Conway finds serious fault with the scheme and says it is time for it to be reorganised and rebranded. He argues that it needs to become what it says, a serious alternative to the choice of mortgages available, not just “a hidden and unknown product that even those charged with selling it are not doing”. To get the scheme working, Conway, a director of Irish Mortgage Corporation, suggests that the Department should no longer look for two rejections by mainline lenders. He also recommends that the length of mortgages should match the main lenders and be extended to 35 years.

In addition, he wants the qualifying income to be lower than €35,000 in the present difficult economic climate. Deposits coming from gifts, especially from parents, should be acceptable, he says.

He also points out that one of the key stumbling blocks to mortgage approval under the scheme revolves around the condition that the applicant must be in permanent employment for two years. Employees who return to work in the same area – like accountants, solicitors, skilled crafts and the so-called smart economy – should be considered worthy and suitable applicants.

Conway would also like to see increases in mortgage interest rates capped at, say, 6 per cent over its lifetime with a 2 per cent annual cap to protect buyers from excessive increases in repayments.

On the face of it, the scheme could be of immense benefit to many first-time buyers if the qualifying conditions were changed. Despite all the claims by the banks that mortgages are still being drawn down, estate agents are seeing little evidence of it through houses or apartment sales. Hence the stagnant market.

The Government scheme offered 92 per cent loan-to-value mortgages subject to a maximum of €285,000 on new or second-hand homes, as well as homes built by the applicant. The loan is marketed as a normal capital and interest-bearing mortgage currently set at 2.9 per cent.

It all sounds grand, but the scheme simply does not work. It is all the more surprising, therefore, that the Department came out strongly this week in defence of the scheme, pointing out that it would be “premature to remove a scheme that provides an important fallback in a still credit-constrained market”.

What a load of rubbish. Clearly the money is winging its way to Greece as we speak.

Report by JACK FAGAN - Irish Times.

Sunday, 9 May 2010

Time To Think The Unthinkable?...

Is it time to start thinking the unthinkable?

If our membership of the eurozone was the cause of our woes, perhaps leaving the club would help fix things...

AS the Greek financial crisis continues to worsen and shows signs of spreading to other eurozone countries, is it time to start thinking the unthinkable? With Portugal and Spain now in the firing line, we in Ireland need to start asking the hard questions about both our exchange rate policy and our debt mountain.

On Tuesday, Finance Minister Brian Lenihan was quoted as saying that leaving the euro would be a "disaster" for Ireland.

"Were a country to contemplate leaving the euro there would a flight of capital and a collapse of the banking system", according to Mr Lenihan.

While we have no reason to doubt the minister's sincerity, the fact that he is even discussing the issue, even if only to rubbish the possibility of Ireland exiting the single currency, demonstrates that the worsening of the Greek crisis has massively upped the stakes for all 16 members of the eurozone.

Last week's downgrading by ratings agency Standard & Poors of Spanish and Portuguese government bonds demonstrates that the crisis is no longer confined to just one country. Instead we are witnessing the beginnings of what looks suspiciously like a wider collapse of market confidence in all of the peripheral eurozone economies. If this does prove to be the case then it won't be long before Ireland finds itself in the firing line once again.

There comes a time in every crisis when it becomes impossible to ignore the unpleasant facts.

Yes, our membership of the euro has sheltered us from the immediate consequences of the collapse of our banking system since September 2008. However, was it not our membership of the single currency that was largely responsible for landing us in our current mess in the first place?

At the end of 1997, total bank lending to Irish residents stood at €56bn.

Most of this lending, €48.8bn, or 87 per cent, was financed by Irish retail deposits. Fast-forward to the end of December 2009, and bank lending had risen six-and-a-half fold to €365bn while deposits had less than quadrupled to €171bn. As a result, the proportion of Irish bank lending funded by Irish deposits has fallen from 87 per cent to 47 per cent over the past 12 years.

In other words, by removing the effective cap on Irish bank lending represented by domestic deposits, our membership of the euro was the main cause of the credit bubble which drove property prices to insane heights over the past decade. We are now living with the consequences of the bursting of that bubble.

That's water under the bridge. We must now find a way of extricating ourselves from the mess we are in.

It won't be easy. As the financial crisis has worsened, we have, courtesy of the deposit guarantee and Nama, been gradually nationalising ever-larger amounts of private sector debt. This has meant that conventional measures of measuring the national debt are now virtually meaningless.

For what it is worth, the national debt is expected to reach €95bn by the end of this year. That doesn't include the €80bn, the vast bulk of which will come from the taxpayer, that the Government has committed to recapitalising the banks and to Nama. This will bring the de facto national debt to €175bn by the end of this year and to €190bn by the end of next year.

But that isn't even the half of it. With the taxpayer now effectively on the hook for most of the loans of the Irish-owned banks, the real indebtedness of Ireland Inc is even greater than most people realise. While the Irish taxpayer is not exposed to the Irish loans of the foreign-owned banks, he or she is potentially liable for the overseas loans of the Irish-owned banks.

Coincidentally, at €372bn, the total loans of the Irish-owned banks, both in Ireland and overseas, are virtually the same as the total lending of all banks, both Irish and foreign-owned, in Ireland. Even when one strips out the bad loans with a book value of €81bn which are headed for Nama, that adds another €291bn to the Irish taxpayer's liabilities, bringing the grand total to a scarcely credible €466bn by the end of this year and to €481bn by the end of next year.

At the same time as the debts of Ireland Inc are soaring, the resources available to service those debts are shrinking rapidly. In 2007 Irish GNP peaked at just over €160bn. This year it will be just €126bn, a fall of almost 22 per cent. This is due to a combination of a 16 per cent reduction in the real economy and falling prices.

Deflation, a shrinking economy and rising debts constitute a lethal cocktail. Falling prices push up the real value of our debts, a shrinking economy makes it more difficult to service the debts, while all the time those debts keep piling up.

This makes Brian Lenihan's job well nigh on impossible. In order to keep the bond markets sweet, he needs to keep cutting public spending. In the short term at least this will depress the economy and tax revenues even further. This means that Mr Lenihan, no matter how successful he is in restoring order to the public finances, is going to have to keep running faster just to stand still.

Meanwhile, there are growing signs that, as the Irish economic downturn enters its third year, many companies that survived the initial shock are now experiencing serious difficulties. While the level of economic activity may have bottomed out, with the cash economy now almost a quarter smaller than it was less than three years ago, the situation remains desperate.

With the Irish economy likely to do no more than bump along the bottom for the next few years, many companies that are now hanging on by their fingernails are unlikely to survive long enough to see the return of better times.

So what can we do? It must now be as clear as daylight that there is no way that a €126bn economy can support a debt load of almost quarter of a trillion euro. By attempting to do so we will merely prolong the agony. We urgently require some sort of debt restructuring, default, call it what you will. Otherwise the Irish economy will remain mired in depression for a decade or longer.

However, even if our debts were restructured we would still need a strong economic recovery to service even our reduced indebtedness. Unfortunately our membership of the euro, which ties us into an over-valued exchange rate, makes this difficult perhaps impossible.

All of which leaves us needing to think the unthinkable, something which the intensifying eurozone crisis will force us to do in any event. Given that it was our membership of the euro which largely created the economic crisis in the first place, will withdrawal from the euro form part of any solution?

Report - Sunday Independent

Saturday, 8 May 2010

RTE Recession 'Aftershock'...

RTÉ is in Recession 'Aftershock'...

A week long session of recession themed programmes will broadcast on RTÉ Television from May 9th – 14th on RTÉ. The series of programmes will examine Ireland’s recession – the effects it has had so far and what we can expect in the future.

The programmes are tipped to reflect the after-effects of the boom and bust: from the reality of unemployment and life in so-called "ghost towns" to positive stories of businesses and families who are thriving in spite of the recession. Other programmes will look at the bigger picture, ask where to from here? and present challenging ideas as to how we as a nation can move on from the shock of economic collapse.

Aftershock launches with ‘Ghost Land’ on Sunday, May 9th. Produced by RTÉ’s documentary unit ‘Ghost Land’ is an observational documentary that goes behind the figures to show the reality of life in the aftermath of our building boom, told mainly from the perspective of residents who have mortgaged their future in a ghost estate. Monday, May 10th sees the broadcast of RTÉ Cork’s ‘The Business’. The programme sees John Murray taking a tour of some landmark properties in London which could end up in NAMA and, therefore, in the hands of the Irish taxpayer. It also looks at business opportunities in London, including the 2012 Olympics, and talks to restaurateur Richard Corrigan and artist Graham Knuttel about succeeding in a recession. Following this is Animo Films’ ‘Where To Now?’ This one-off documentary is made up of four specially-commissioned television essays which argue for radical change in Ireland in the wake of banking, regulatory and government failures and political and Church scandals. The programme features commentators Dan O'Brien, Matt Cooper, Richard Curran and Justine McCarthy and is introduced by Pat Kenny, who will also chair a one-off ‘Frontline’ debate with the four contributors immediately afterwards. Wildfire Film’s observational documentary, ‘Life After Dell’, will air on Wednesday, May 12th. The doc, directed by Adrian McCarthy and produced by Martha O’Neill charts the past 12 months for four different families following the announcement of their redundancy at the Dell plant in Limerick.

Thursday, May 13th sees an Aftershock special on ‘Capital D’ where the programme makers spend a day in the Dublin Job Club in the Digital Exchange. The club was set up by Dubliner Aaron Downes, initially to help friends who were no longer working but has since grown rapidly. With members sharing skills, particularly in technology, many have now found new jobs or have started their own businesses. Anne Cassin will also talk to some couples who are about to tie the knot and examines how the recession is affecting weddings. And ‘Capital D’ meets some adults returning to 3rd level education to gain new qualifications in a changing job market. The series producer involved is Mary Butler.

Thursday will also play host to a ‘Prime Time’ special report where the team will investigate how Ireland is faring in the recession when compared to other countries. The programme will ask how we are faring and what lessons are to be learnt both here and elsewhere.

Finally RTÉ’s Nationwide will, on Friday May 14th May present a special programme to mark Aftershock week, focussing on a number of small businesses that are exploring new avenues of work as the recession impacts on their lives.

The transmission dates and times of all the above programmes are listed below:

* ‘Ghost Land’: RTÉ One, Sunday 9th May at 9.30pm
* ‘The Business’: RTÉ One, Monday 10th May at 8.30pm
* ‘Where To Now?’: RTÉ One, Monday 10th May at 9.35pm
* ‘Life after Dell’: RTÉ One, Wednesday 12th May at 9.35pm
* ‘Capital D – Aftershock Special’: RTÉ One, Thursday, May 13th at 7.00pm
* ‘Nationwide – Aftershock Special’: RTÉ One, Friday, May 14th at 7.00pm
* ‘Prime Time: Special Report’: RTÉ One, Friday, May 14th at 9.30pm.

Info from: Irish Film and Television Network - Broadcast News

Monday, 3 May 2010

Rezoning Madness...

Land rezoned for 800,000 more homes than needed...

Glut highlights role councillors played in fuelling the boom.

COUNCILS have rezoned enough land to build almost 800,000 new homes that the country does not need, an Irish Independent investigation has found.

Local authorities have rezoned enough land to construct almost 1.1 million houses and apartments across the country at a time when thousands of homes lie empty in 'ghost estates'.

But official projections received by the Government have found fewer than 300,000 new units are needed between now and 2016.

The revelation highlights the extent of the role councillors and planners have played in fuelling the property boom which collapsed with devastating consequences.

Some councils including Meath rezoned up to 60 times more land for residential use than was needed.

Just two out of 34 councils -- Limerick and North Tipperary -- under-zoned land.

Councils who designated too much land for housing will now be forced by the Government to de-zone it back for agricultural use.

New laws due to pass through the Dail will compel local authority members to heed official planning guidelines instead of merely paying them lip service.

Green Planning Minister Ciaran Cuffe last night vowed councils who engaged in rezoning "madness" would be ordered to either de-zone the land, designate it for other uses or allow restricted development.

"There has been massive over-zoning. This is now clear. We need to learn the lesson of the ghost estates which we now have as a result of us losing the run of ourselves during the Celtic Tiger years," he told the Irish Independent.

"In Monaghan there is enough land rezoned for 60 years. That's madness."

Draft planning guidelines obtained by the Irish Independent reveal just 290,000 houses and apartments will be needed nationwide over the next six years.

However, official figures by each local authority sent to the Department of the Environment reveal councils have rezoned 33,000 hectares of land -- enough to build a staggering 1,086,119 units.

The draft guidelines also warn the current overhang of supply will extend "into the coming years" as uncompleted schemes are eventually finished and sold.

"In the short term it is not planned for, or expected, that housing completions will be significant," the documents state. "The figures (for housing demand) for 2016 may prove unachievable as the housing market is likely to be slow to recover."

The government report warns targets by "most of the councils" for building homes up to 2016 will now have to be deferred until at least 2022.


It advises that demand for housing should be met by using properties lying idle in ghost estates instead of building new homes.

The report also calls for a ban on "doughnut" estates, where large numbers of houses were built in villages and rural areas instead of in towns and cities. Mr Cuffe heavily criticised councils for allowing housing estates to be built up to three miles from towns and villages in rural settings where families had to rely on cars.

He said councils did not have the money to service these estates with water, roads and sewage.

And he warned local authorities will be given just 12 months for their development plans to fall in line with regional guidelines. But councils forced to de-zone land for 800,000 homes will not have to pay compensation to developers. This was removed in the 2000 Planning and Development Act.

Report by Paul Melia and Treacy Hogan - Irish Independent