Thursday, 28 October 2010

Curse of The Economist...

The Economist is at us again: in its survey of global house prices out at the weekend, it said that only four of the 20 markets surveyed had posted year-on-year price declines and only Ireland’s property catastrophe had worsened.

We came bottom of its league, with a 17 per cent fall in prices between the third quarters of 2009 and 2010.

In another global house price survey, this one from estate agency Knight Frank comparing the second quarters of both years, we only came second from the bottom – Estonia recorded price drops of 31.5 per cent, nearly double the fall here, again, given as 17 per cent.

Cold comfort, of course, when the story told by both surveys is that property markets across the world are getting back on their feet, with Asia’s price rises leading the way – and we’re not at the party.

If you’re emigrating to Australia and thinking of buying, read The Economist’s words of warning. Aussie house prices rose by 18.4 per cent in the period surveyed and The Economist calls it the most over-valued of all the markets it tracked, wondering why Australia’s central bank has opted not to increase its interest rates. It makes approving noises about China’s moves just over a week ago to raise rates to cool its overheating market.

Other countries with heated housing markets include South Africa and Canada. Yes, according to Knight Frank, there’s speculation that the most sober of countries is entering bubble territory.

However, the Canadian government is on the case, raising its base rate three times this year and reducing “the maximum allowable amortization period from 40 years down to 35”!

Those conducting the surveys urge caution over the good news that house prices are on the rise in most markets, as there are still dark forces out there that we in Ireland know all too well about – availability of funding, austerity measures and so on – that could put things into reverse.

Report - The Irish Times

Tuesday, 26 October 2010

Legacy Of Ghost Estates...

A POETICALLY-titled report, A Haunted Landscape: Housing and Ghost Estates in Post-Celtic Tiger Ireland , estimated last July that there were more than 620 such estates where over half of all the houses were either empty or unfinished – exceeding 300,000 units in all. Now we are being told by the Department of the Environment, following an on-the-ground survey of over 2,800 developments, that the phenomenon is not quite so widespread. Of the total of 180,000 houses or apartments involved, 77,000 were found to be occupied, 33,000 were completed and vacant, 10,000 were at varying stages of construction and the remaining 60,000 were not started at all; further building plans had obviously been abandoned as the property bubble burst.

The photograph in yesterday’s editions of two children playing on a “street” in Co Cork with everything unfinished around them shows that there are are real victims of this “legacy issue”. The degraded environment of such estates, with their unpaved footpaths and roads, piles of builders’ rubble and holes left unfilled, is not just aesthetically unpleasant, but also represents a real danger to children in particular. It is surely a major worry for parents, adding to the woe of having to make unsustainable mortgage repayments for homes that have tumbled in value.

According to the Department of the Environment, its survey “establishes a proper evidence basis for further action by Government and local authorities in relation to planning, housing, building control and other matters towards resolving the emergence of unfinished housing developments”. Indeed, Minister of State for Housing Michael Finneran said it was “already initiating an action plan” to address all of these issues.

Mr Finneran was quick to deny that Government tax incentives which inflated the property bubble so catastrophically had much to do with generating unfinished housing estates. Yet it is clear from research carried out by NUI Maynooth’s National Institute for Regional and Spatial Analysis (Nirsa) for its Haunted Landscape report that there was a massive over-production of housing in Cavan, Longford, Leitrim, Roscommon and Sligo, and this was fuelled by the wholly misconceived Upper Shannon Rural Renewal Scheme introduced in 1998 by then minister for finance Charlie McCreevy and only wound down on a phased basis by his successor Brian Cowen. Both of them must accept their share of responsibility for the ghost estates in these five counties.

Nirsa called last July for an independent inquiry into all aspects of how the planning system operated, including charges of “localism, cronyism and clientilism”. Its call was echoed this week by housing association Respond!, which said the ghost estates phenomenon indicated a “complete failure” of the planning system: “Without doubt the banks were a key player, but there would not have been the same demand for credit to purchase land or property had zonings and planning permission not been so easily available”. Blame must be apportioned before we can move on.

Report - The Irish Times.

Friday, 22 October 2010

Ghost Estate's €870m Tax Breaks...

Ghost estate builders got €870m tax breaks...

But no cash to finish 'eyesores' as 33,000 houses stand empty:

DEVELOPERS got almost €870m in tax breaks to build thousands of houses that no one wants, the Irish Independent has learned.

And the Government yesterday admitted there was no money to finish off the 2,800 ghost estates in which 33,000 houses and apartments are lying idle.

Local communities will be stuck with these eyesores for years as bulldozing them has also been ruled out.

And planners will not face any sanction for their role in fuelling the property bubble.

The first official audit of the number of unsold and half-built houses and apartments in so-called ghost estates published by the Department of the Environment yesterday showed the full extent of the problem.

The report found:

* There are 2,846 ghost estates containing 33,225 empty units ready for sale.
* Cork has the most unsold homes, 3,427. Limerick City has the least, 119.
* Planning permission was granted for 180,000 units in the estates. Work began on 120,000.
* Of the total, 77,000 are occupied. But another 10,000 are far from finished. Sources said the bill to complete the work could reach €1bn.
* Builders are working on just one in six estates. Thousands of homes are not served by roads, footpaths or public lighting.

Homeowners paying mortgages on properties surrounded by building sites, open sewers and unbuilt roads and footpaths will have to wait until next year until a plan to tackle the problem is unveiled.


The Government is to set up a taskforce including NAMA, the local authorities, the Construction Industry Federation and Health and Safety Authority to see how estates can be completed and who will foot the bill. It will report back in January.

Planning Minister Ciaran Cuffe ruled out demolition, saying this decision would rest with the developers or banks.

"It's not a matter for the department," he said. "We want to see as many of these developments as possible finished out, and that will happen in a large number of cases."

Figures obtained by the Irish Independent show how tax breaks fuelled the bubble that led to the problem.

Between 2004 and 2008, some €869.5m was claimed by developers who built housing in areas identified by the Government as being suitable for massive developments.

In 2008 alone, with the market in freefall, almost €150m was claimed under the urban, town, seaside and rural renewal schemes.

Some developers have been bailed out, as the Government has taken out long-term leases on 2,500 units for social housing purposes.

New laws allow local authorities to acquire unfinished estates, but most won't have the money to complete them.

Housing Minister Michael Finneran admitted bonds and securities lodged by developers would not meet the bill.

Planning Minister Ciaran Cuffe said the Green Party was totally opposed to the blanket tax designations introduced by Fianna Fail.

He said it was "naive" to think tax designations of entire counties ''would raise all boats'.'

The Irish Council for Social Housing said it could take over some of the homes if "outstanding issues" were resolved.

The Labour Party claimed the problem was a legacy of a government that saw housing policy "as a means of delivering bounty to their pals in the construction and investment community" rather than providing homes for people.

Report by Paul Melia and Treacy Hogan - Irish Independent.

Wednesday, 20 October 2010

Serious Mistakes Made...

Mansergh concedes that serious mistakes were made...

THE IRISH public is determined to remain in control of its own affairs despite the scale of the financial crisis, Minister of State Martin Mansergh told leading economists in London last night.

“There is a determination to try and maintain control as far as we can in our affairs, and to avoid – and to do whatever we have to do to avoid – outside dictation either on expenditure or taxation.”

Speaking to Politeia, an economic forum in London, Mr Mansergh readily conceded that serious mistakes had been made by governments over the last decades.

In the late 1990s, public spending controls were eased up, with the number of public employees rising by 50 per cent and the salaries for those in higher ranks by 80 to 100 per cent, sometimes even more.

“I think there is an argument for saying that Irish society, or certainly the upper echelons – whether involved in the public or private sector – did become somewhat greedy when the good times were growing.

“Pay in the middle to upper echelons of the public sector went up a lot more than was justifiable,” said Mr Mansergh.

Acknowledging the scale of public anger and fear in Ireland, Mr Mansergh said “national hubris [has been] replaced by a sentiment sometimes expressed as ‘call in the IMF’, or even hand the place back to Her Majesty or, worst of all, ‘put the celebrity economists in charge’.

“The effect of the crisis, where domestic and international factors compounded each other, came as a large shock to a country that was convinced not only that it was doing brilliantly, but that it had been operating well within the margins of safety.”

Many now claim to have foretold the crisis, he said, but the record does not bear them out. “I have to say that the property supplements of the media were among the biggest cheerleaders of the property boom.”

He rejected the premise of a question from economist Irwin Stelzer, who said some IMF research clearly showed that countries that rapidly cut public spending go into an economic spiral.

The IMF, he said, has changed “from what it was” under the leadership of Frenchman Dominique Strauss Kahn who, he noted, was a possible Socialist candidate for the French presidency.

Former finance minister Charlie McCreevy’s declaration that “when we have it, we spend it” would not win economic prizes, he said, “but very fortunately he did not entirely act on it” since he created the National Pension Reserve Fund.

Report by MARK HENNESSY - Irish Times.

Saturday, 16 October 2010

Cowen's Hairshirt Budget...

Cowen issues warning about hairshirt budget: 'Major hole' in tax base must be filled...

TAOISEACH Brian Cowen last night set the scene for a hairshirt Budget by delivering a stark warning about the state of the public finances.

In an off-script address at a chamber of commerce event in Monaghan, he said he wanted to bring it down to "brass tacks", instead of talking about all the zeros and the billions.

He said the Government was trying to fix the "major hole" in its tax base, following the disappearance of one third of revenues due to the economic crisis.

"This year, we're spending €50bn and our revenue base is €32bn. Let's put that in context. One half of total revenue is being devoted to the health service presently," he said.

Mr Cowen went on to say that social welfare, including pensions, child benefit and disability benefit, accounted for two-thirds of tax revenue.

"So if you were to take health and social welfare alone, you would be borrowing some money -- and that's to exclude all the remuneration on wages we have to pay for our guards, for our teachers, for our Army, for IDA and in agriculture."

Mr Cowen is set to meet Fine Gael leader Enda Kenny and Labour Leader Eamon Gilmore to discuss the Government's four-year plan to reduce the public-finance deficit to 3pc of national output by 2014.

"I'd like to have a meeting so we can confirm that objective is shared by us all and obviously if there are other areas of agreement we can build on. I think it would be important, it would send a positive signal to the international community and help domestic confidence at home," he said.


At the Four Seasons Hotel on the outskirts of Monaghan town, Mr Cowen told around 100 guests of the Monaghan Chamber of Commerce that even without taking the cost of the banking crisis into account, the current situation was not sustainable.

"That situation has to be corrected. Unless that situation is corrected, we put at risk all of the advances that have been made," he said.

And he warned that it would mean having to introduce cuts in public spending and increase the taxation base because "€32bn would not be sufficient to provide services for the country going forward".

Mr Cowen said that if previous cost-cutting Budgets had not been introduced over the past two years, the Government would have to find an extra €7.5bn in revenue for December's Budget.

He warned that the bondholders and investors who were funding the budget deficit up until 2014 needed to be convinced that the country was facing up to the challenge.

"Unless we do that, we put at risk the very funding arrangements that provide services in this country today.

"That is the scale of the challenge that we face. Can we come through that challenge? Yes, we can. The Government has to look at ways we can generate more confidence, given the savings rate."

Mr Cowen said that even if there were only 100,000 people unemployed in Ireland, it would still be 100,000 too many. But he was confident that the country could come through its current difficulties.

He added: "Our plans will be allied to a growth strategy that will give us the very best chance of doing so, with the minimum impact we can. But to say it can be done without impact is not only to fool oneself, but to fool the people -- and that's not a currency in which I engage."

Report by Michael Brennan - Irish Independent

Monday, 4 October 2010

Ghost Estates Four Times Estimate...

Number of 'ghost' estates four times initial estimate...

THE number of 'ghost' housing estates stands at 2,700 -- four times higher than thought, according to the first official government estimate.

This means that taxpayers face an even bigger bill for the mess caused by developers and the banks.

Ghost estates are defined as those that contain unfinished, unoccupied, or partially occupied house and apartment blocks.

The first government-ordered audit of how many such estates exist has now revealed the extent of the problem. A previous estimate, earlier this year, calculated there were 621.

Many of the estates in the new total of 2,700 are located in the midlands and north-west, the Irish Independent has learnt.

The report outlines six categories of properties,ranging from those which are 'turn key''-- finished but unoccupied-- to estates where only preliminary groundwork has taken place. Other estates are partially occupied, but have half-built houses and apartments which are boarded up.

One-in-four unoccupied buildings in ghost estates pose serious safety risks because sewers have been left open, water is contaminated and building sites are not secured properly.


Last April, Planning Minister Ciaran Cuffe and Housing Minister Michael Finneran jointly ordered an investigation into the scale of the problem.

Each local authority was told to report the exact number of ghost estates in their area.

As a result, a report outlining the situation is to be published in the coming weeks.

Many of the new houses will be bulldozed because of health and safety concerns. Others will be taken over by local authorities for use as social housing.

Some of the estates have been taken over by banks after developers went bust. These will be finished by other builders and sold at a discount.

It was initially believed developer bonds or securities lodged with local authorities would finance an overhaul of half-finished estates.

But in many cases developers ignored preconditions and pressed ahead. While many bonds were not paid at all, in other cases they were so small that they are now deemed irrelevant given the scale of the clean-up operation.

This means that taxpayers will have to foot the bill. Many estates will be bulldozed, others will have the houses finished and sold.

NAMA has indicated that it is prepared to demolish half-completed buildings which it believes have no value as homes.

Sources said the government audit reveals that many of the ghost estates are attached to villages and towns in the midlands and north west, with Leitrim, Sligo, Longford and Roscommon worst affected.

Taxpayers face the prospect of having to foot the bill to make the sites safe because developers failed to pay bonds that would be used to complete the developments.

The number of housing units in ghost estates is believed not to exceed 100,000.

Government sources said that following publication of the report detailing precise numbers and locations, an action plan will be put in place.

Councils will be given power to take control of the worst unfinished developments, while NAMA will take on the lion's share. The main concerns about many of them relate to water, sewerage or road access.

Planning permission will expire on many of the ghost estates in the coming years and NAMA will have to decide whether to seek extensions to allow them be completed.

Otherwise, councils will be allowed to take charge and complete unfinished roads and sewerage as well as demolish half-finished houses.

The sources said: "Some of these half finished houses are actually rotting. There are obviously very serious health and safety issues here. Some of those which are uncompleted will have to be knocked."

Report by Treacy Hogan - Irish Independent

Sunday, 3 October 2010


Doomsday media coverage and the matter of the truth...

A bit like the rain in a Frank McCourt novel, the bad news on the economy never stops pouring down on us. That picture of Ireland now seems firmly set in the opinion of the international media. Once the sick patient of Europe dutifully taking its medicine to help it get better, we are now, as the doctors might say, experiencing an adverse clinical event that is threatening our very life. The cure might be killing us.

Last week's extremely disappointing news that the economy had contracted again by 1.2% in the second quarter added yet another symptom to the many more that erupted within just a few days: international bond market rates at record levels upping the price of government debt and therefore necessitating an even worse budget; long-term unemployment up; emigration up; 110,000 households in arrears on electricity and gas bills. The list of damaging symptoms was endless.

All last week, international
commentary from the Wall Street Journal to the Financial Times, from the Guardian to the Süddeutsche Zeitung, conducted postmortems over what has gone wrong as Erin goes ever more broke.

Even Ed Balls, a close colleague of former British prime minister Gordon Brown, has joined in the dissection of our economic entrails. "These figures are a stark warning to governments across Europe including our own," he said. "[Ireland's] is not a credible economic strategy because lower growth and fewer people in work and paying taxes ultimately leads to a bigger deficit, not a smaller one."

The role of the media in the negativity gripping the country was raised last week by some of the biggest names in business and finance. Has media coverage become part of the problem? Gerry Keenan, chairman of the Irish Association of Investment Managers, condemned the "almost hysterical endorsement" of doomsday scenarios surrounding our ability to borrow on the bond markets.

Communicorp chief Denis O'Brien argued that Ireland's credit rating was being damaged by "cheap shot" commentators. "Irresponsible, speculative articles, while they make great headlines, are impacting our international credit rating around the world," he said. He also condemned one newspaper's coverage of the worldwide travel of Sean FitzPatrick's daughter as chronicled on her Facebook pages. It's not a view that would garner much support from the people of Ireland, and their children, who will pay for FitzPatrick's reckless choices for a long time to come.

John Corrigan of the NTMA asked the media to step into the shoes of a bond dealer to find out how s/he thinks about Ireland. The idea, from a man earning €490,000 a year (with a possible bonus of up to €390,000), that the interests of international speculators come before the concerns of taxpayers will not receive much welcome from those struggling to make ends meet.

Minister Brian Lenihan took a more pragmatic line. It was facile, he said, to expect "national back-patting" from the domestic media, but good and bad news had to be reported in a balanced way. The minister is right. The media has a responsibility to be balanced, responsible and credible in its reporting of this country's economic woes. But, as the late Vinnie Doyle, Irish Independent editor for almost 25 years, who passed away last week, said, the duty of truth to the reader comes first.

The biggest problem with the handling of the crisis is the failure of our political leadership to construct a comprehensible and honest narrative to help us understand what is going on and offer a step-by-step way out. As Danny McCoy of Ibec pointed out, if the debt crisis was deconstructed into digestible bites, like how much extra it will cost each household per week, there would be a better understanding of how to tackle the situation without losing the confidence to spend.

That failure is why both Brian Cowen and Enda Kenny are collapsing in the polls. Neither has connected with the public. Brian Lenihan's clarity has earned him trust. But Eamon Gilmore's articulation of the nation's anger is the reason he is riding so high in the polls.

At the same time, Gilmore is professionally cynical because he has not put any flesh on the policies he says he will implement in government. It's a clever game to promise that there is "another way", but until he provides a more detailed map of the course he intends the country to take, he may find that, in the real poll, his popularity is based on what the electorate regards as empty PR.

Frank McCourt, said of Angela's Ashes that he "just wanted to tell the truth as I experienced it". That is the motivation behind most media coverage of the economy. The trouble is, the truth as most people experience it these days is more misery than unbridled joy.

Report Tribune News

Friday, 1 October 2010

Drunken Premier Playing Into Hands Of EU...

A drunken Premier playing right into the hands of the EU

Can one bank bring down a country? At the end of August, a reporter from the New York Times asked that question about Ireland's bust Anglo Irish Bank.

The Dublin government denied such a thing were possible. Yet now it is looking very much like it might happen.

Anglo's debts are so vast that the government may have to pay 34billion euros to bail-out the bank. Bail-outs for other Irish banks will bring the total to 50billion euros.

Party animal: Irish Premier Brian Cowen and admirers at a Fianna Fail function

Brian Lenihan, the finance minister, was forced to admit yesterday that these bail-out costs will push the national deficit this year to 32 per cent of GDP.

Such figures would be shocking in Britain. Even at its worst, Britain's deficit is heading for little more than 10 per cent.

However in Ireland, where the entire working population numbers just 1.8million and unemployment is at 14 per cent, figures like that are beyond shocking. They are catastrophic. Words such as Armageddon and apocalypse are being used by economists.

But here is the worst of it. The EU chiefs not only think that Ireland's crisis will turn into a national death-spiral, they may be secretly hoping it will.

Brussels knows that the further Ireland and other troubled eurozone countries sink into financial disaster, the greater the excuse the eurocrats can find to achieve one of their long-standing ambitions: to take control of national budgets.

Yesterday, Olli Rehn, the European commissioner for economic and monetary affairs, said he intended that the punishments planned for eurozone economic rule-breakers such as Ireland should soon be extended to all members of the EU, including Britain.

Commission president, Jose Manuel Barroso, prophesied 'the biggest step forward in economic governance'. What that means - and this is why it should alarm Britain - is that EU chiefs want national budgets to come under their scrutiny. Any member state which failed to meet budget criteria laid down by Brussels would be fined, perhaps have EU funds cut off, and possibly lose its vote in the European Council.

The commission will use Ireland's present pain as an excuse to grab more powers.

Of course, it wasn't supposed to be like this. Ireland struggled its way out of debt and recession in the 1980s to find real growth in the 1990s. By 1997, the country was celebrated on the front cover of the Economist as 'Europe's shining light'.

But then came the single currency. Ireland joined the euro for the most foolish of reasons - to prove it was no longer under the influence of Britain, the old ' colonial' power. In joining the euro, the Irish wanted to prove theirs was now a 'European' country.

Membership of the euro was what began Ireland's disaster. First the European Central Bank ensured that eurozone interest rates were kept low to suit the sluggish German economy. Ireland's economy, however, was already bubbling. The euro's low interest rates were like pouring petrol on to a fire.

Brian Cowen, who is now prime minister, was finance minister during the period the boom turned into a bubble. He could have cooled the property market. Instead, he exploited it to indulge in a public spending orgy.

Now he refuses to take any responsibility for the crash, or the vanished tax revenues.

Instead, this month he embarrassed his country with an alcohol-fuelled 3am singing session in a Galway bar. It left him sounding, as one opposition politician put it, 'somewhere between drunk and hung-over' during an important national radio interview the next morning.

Since Mr Cowen inflated the bubble, house values nearly halved in Ireland and are still falling, and some of the commercial investment property has now lost 90 per cent of its value.

So much money gushed into rogue-lender Anglo that the bank grew to be the size of half of Ireland's national wealth. The crash left Anglo and the other banks debtors who could not pay.

Yet the Irish government has only recently admitted the full volume of this looming disaster.

For the first months following the world's crash into financial and economic turmoil, the Dublin government presented itself as uniquely virtuous.

It bragged about how its public sector pay cuts and spending cuts were more severe than in any other country.

What it didn't mention-was that Irish civil servants were the highest-paid in Europe. The cost of public sector wages remains around 40 per cent of GDP.

Most of the austerity was an illusion, but the government won admiration abroad for appearing to make cuts. As the truth of the banks seeped out, the admiration stopped. A chorus of international economists started predicting disaster for Ireland.

Some now reckon Ireland must eventually default and be forced out of the eurozone. Some calculate Ireland will soon be in worse shape than Greece.

No one much believes the finance minister's constant assurance that the debts are ' manageable.' All the government's calculations are based on growth restarting in the economy. But in the last quarter, Ireland's stricken economy began to shrink again.

The question now is whether Ireland will have to turn to the EU for a bail-out. That is likely to come. But the cost to Ireland will be worse than borrowing more billions on the financial markets. It will be forced to surrender ever more control over its taxation and its spending to the EU.

Ireland's misery is Europe's opportunity. And Britain's grave danger.

Report by Mary Ellen Synon - Daily Mail.