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Thursday, 29 July 2010

Property Bubble Inquiry...

Call for inquiry into property bubble...

An independent inquiry is needed into the Government’s failure to control the property bubble, a State-funded academic institution said today.

In a scathing report, the National Institute for Regional and Spatial Analysis (Nirsa) also demanded a full investigation into charges of cronyism in the planning process.

Furthermore, the body which examines how the country is developing, claimed the National Asset Management Agency (Nama) is a worrying organisation set up as part of a response to protect developers potentially at the expense of taxpayers.

Professor Rob Kitchin, director of Nirsa, which is based in NUI Maynooth, said an inquiry into planning decisions and alleged close links between politicians and property speculators was necessary if the housing market was to recover.

“An independent inquiry is needed to investigate all aspects of the planning system and its operation within and across different agencies and at all scales in Ireland including charges of localism, cronyism and clientelism,” he said.

Prof Kitchin said it would be foolhardy to carry out a banking inquiry without also looking into planning mistakes.

In a 66-page report into the crisis, Nirsa lays blame for the property boom and bust squarely with the Government and local councils.

It says light touch regulation and tax incentive schemes administered by a political system infected by those in power favouring friends were the chief culprits.

Planning guidelines, regional and national objectives as well as proper assessment of demand for housing were ignored, it claims.

Nirsa says Nama, banking bailouts and nationalisation are worrying short-term moves involving “the protection of the interests of developers and speculators at the potential expense of the taxpayer.”

Prof Kitchin said there is now a growing sense Nama is paying too much for the loans it is buying from the banks. There is also a “worrying lack of transparency” around the agency and legitimate questions hanging over its potential, he argued.

“The truth is - based on current modus operandi - we will not know whether it might succeed or fail until much further down the line,” he said. “That may be too late.”

A home-grown “litany of systemic failures” that allowed the over-development and re-zoning of too much land will see housing lie empty in some areas for more than a decade, according to the Nirsa report.

“The banks could have lent all they wanted but if zoning and planning permission was not granted, property construction could not have gone ahead,” said Prof Kitchin.

The report concludes there is presently no need for any more homes to be built in Ireland apart from some social housing. House prices are also likely to fall further, with the average home expected to drop in value by as much as 60 per cent from the peak in February 2007, it found.

Nirsa said the property over-supply is not confined to housing, with too many hotels, offices, shopping centres, retail parks and industrial units also built. “Ireland is awash with buildings that few people either can afford or want to purchase,” it states.

The report also found:

- Reckless planning has left one in six houses uninhabited for most of the year.

- More than 300,000 homes are unoccupied and there are more than 620 half-empty or unfinished “ghost estates”.

- Tax incentive schemes greatly exacerbated the crisis as counties with most empty housing - Cavan, Longford, Leitrim, Roscommon and Sligo - built most new developments.

- The number of houses in these counties soared by almost half during the boom and they have enough housing now zoned to feed demand for the next 27 years.

- Nationally, there is enough excess housing and zoned land for the next 17 years.

- Cork city has enough for the next 64 years, Monaghan for 59 years, Dún Laoghaire Rathdown for 47 years and Roscommon for 45 years.

Nirsa said just six local authorities - Fingal, Kildare, Galway City, Meath, Wicklow and South Dublin - had employed relatively sensible planning during the boom.

The report argues that seven key issues need to be addressed before house prices bottom out and the property market can recover.

These include linking supply with demand; economic growth and job creation; linking house prices to average wages and affordable mortgages for first-time buyers.

It also requires concerns over Nama to be allayed; a verifiable end to the banking crisis and an overhaul of the planning process. Nirsa also calls for a clear plan of action to deal with “ghost estates”, including an investigation into alternative uses.

Minister for Planning Ciarán Cuffe said the Nirsa report echoed the concerns raised by the Green Party for years.

“There is a direct link between planning failures and the over-supply of housing in totally inappropriate places,” he said. “This did feed the property bubble which has now had terrible consequences for so many ordinary workers and their families.”

But Mr Cuffe insisted many of its recommendations have already been covered, through the imminent Planning and Development Act and a forthcoming investigation into planning failures at six councils.

“This process will be very revealing and there is nothing to stop its extension to other areas,” he said. Measures to deal with “ghost estates” will be revealed in the coming months, he added.

PA - Irish Times

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