This may help to understand the dynamics behind residential property development
Self serving, self aggrandising and opportunistic populist (tautological I’m sure) Rory Hearne pushing his book Gaffs with the subtitle “why no one can get a house and what we can do about it”
Unfortunately I felt moved to call him out, on Twitter of all places, as follows:-
“I doubt you’ve any real solutions. If you have, the rest of the developed world would love to hear them. Cos they’ve got the same problem. Imagine Rory, you’d make even more out of selling the solutions than you’ll make from writing a book pointing out the problems.
However, I suppose they’ll be solutions/proposals like:
Lower the standards of residential accommodation to what it was when our parents generation could afford a house;
Prevent people objecting to new housing;
Shorten the planning and appeal process from 2-3 years to 2-3 months;
Force property owners to sell potential sites for practically nothing;
Force developers to invest and risk their money and work for free;
Force tradespeople to work for less;
Force materials suppliers to sell for less;
Force the banks to provide finance for residential construction, at reasonable rates;
Force the local authorities to grant planning in 2-3 months;
Force more people to all-of-a-sudden enlist and immediately qualify in planning, construction trades, architecture, engineering, quantity surveying, landscaping, ecology, traffic planning, waste management, and of course to work for less.
Basically, turn the economy into a construction-focussed machine: - like it was in the Celtic Tiger years.
If you do all this, there’s an outside chance that the fabled €250k house will be achievable.
Go on Rory, admit it, at least some of these things are on your agenda.
Well said Steven. The incredible thing, or one of them anyway, is the argument he came up with to the effect that the housing crisis is a deliberate creation of FF/FG. An argument gleefully seized on by the leader of the cult that believes ‘Ireland is a cesspit creation of its neoliberal elite’, FO’T.
Ireland has more houses than ever, more dwellings per 1000 people than ever. In O’Tooles socialist paradise of 1971, Ireland had 265 dwellings per 100,000 people. Today, it is well north of 400 dwellings per 100,000 people. And there are a lot more people! So, building stuff doesn’t appear to be the problem, at least over time.
The idea that council houses of 70 years ago were of sound quality is risible. I could go on. Thanks for your comments
Successful economy – probably the biggest threat to the continuation of this phenomenon is housing provision and lack of progress on major infrastructure provision. I don’t know if this can be solved at all and can only make a couple of observations.
Housing – apart from small niche developments in high-end areas, there is no alternative to going up. However, this form of construction is expensive. Actual delivery is a huge issue:- classic example, me and my partners would truly like to deliver apartments to the Dublin market for sale to the general public, at an affordable price (given reasonable access to mortgage funding), while making a profit for our time, money and expertise invested. But 3 years after purchasing the site, and over 2 years since initiating the planning process, we expect to be unable to fund the construction (lack of bank funding), nor make any profit, even at current price levels. There are many sites with planning permission already that are unviable (Pat Kenny will insist the owners are hoarding). Therefore, unless materials become much cheaper and tradesmen become ready to work for less, and developers work for free, I can’t see how more product would be produced if we enter a phase of falling property values. Any fall in rental levels would be accompanied by flight of capital and a collapse in construction. Ergo more shortage. I can’t see homeowners selling if they’ve nowhere else to go, however I could see Funds exiting the market, making those expensive apartments available for sale as they take losses on their way out. This wouldn’t add to the overall stock though.
Infrastructure. This is the biggie behind all our woes and future limitations.
1. Failure to invest in intercity transport means we can’t take advantage of appropriate building lands further afield than the centre of Dublin.
2. Failure to invest in a metro means we don’t take advantage of the outer city areas in any efficient way.
3. Failure to urgently facilitate what’s required to get offshore windfarms up and running.
Planning – screwed. More and more complex as we seek to avoid the errors of the past. Perhaps we could go back to a two-stage system, whereby the simple design/planning proposal was dealt with separately from all the construction detail, and let the Building Regulations, which replaced the Building Bye-Laws of old, be applied to a separate application and oversight of the works by a publicly appointed team of inspectors. Not even sure that’s an answer, to be honest.
Shortage of people everywhere. Not helped by the shortage of accommodation.
Politics, news media and constant complaints about the government, despite the relative success of the economy: Regardless, people always go for change, just to see what might happen. To paraphrase Schopenhauer: - Life is a more or less violent oscillation between pain and boredom, in the degree in which we are fortunate enough to get away from the one, we approach the other. Enter Sinn Fein. Exit the Funds behind the build-to-rent sector. Small scale landlords will have left before then if SF is looking like the next government.
Not at all rambling and not too long. You raise a number of issues. It does seem obvious that we need to build both up and down. High rise high quality apartments and a metro. Dublin is the only city of its size & nature in the developed world without an underground railway or very tall buildings. One warning: Vancouver, like many other world cities, has hundreds of skyscraper apartment blocks, all very high quality. And prices are still unbelievably high! Supply needs to rise to meet demand but we may be surprised by how much supply creates demand!
Your points about development costs are also well made. This is not my area of expertise. I confess to being baffled by just how expensive development is. We are in complete agreement: planning has to be thoroughly reformed and vested interests slapped down.
Ireland needs to look at the U.K. to see what happens if you swap a government of centrist pragmatists for a bunch of ideological populists.
Hi Chris, I see the sense in that, however slightly more than 50% of Irish people own their own homes without any mortgage outstanding. Given that the 50% that may be incentivised to sell in an economic downturn will need somewhere to move to, we’re back to the same Gordian Knot showing it’s ugly head again
Higher interest rates will unlikely reduce prices except in the secondhand market. And why would people sell when they’ll presumably need an alternative place to stay. I find it hard to see this unlocking any supply. More likely to retrench the market. Funds won’t be able to participate in the BtL market as the yields will have to be several percent higher and for that to happen would require higher rents and so on…..
The second hand market is where the vast bulk of property exists. Yes, new build will slow but that’s always a typical component of an interest rate/economic slowdown induced fall in house prices. Sadly. As I said, it’s not the way we would choose to lower prices. But high house prices have low mortgage rates as one of many drivers. I fear we are about to get the reverse.
I wonder in an Irish residential property context would rather modest interest rate rises have any affect on demand at all in an environment where the central bank rules tend to be the biting constraints on what people are are able to borrow?
If the deposit is the biting constraint then the energy crisis will undoubtedly eat into people’s ability to save, so that could slow demand. But if the salary multiplier is the constraint, then inflationary wage pressures amongst the better paid MNC sectors might actually produce an increase in demand.
And then you have the cash buyers, who don’t have anywhere good to put their money at the moment.
I find it very hard to forecast the house price demand given how complicated the factors are. Interest rates are just part of the picture in ireland.
I see what you are getting at. Maybe interest rate rises won't have quite the same effect as in the past. I guess the answer will in part depend on how high mortgage rates actually go. Another intriguing question arises: will the behaviour of other property markets have an impact? If, say, we see a big UK property crash because of recession and 7% mortgage rates, will that have an impact, psychologically at least, on the Irish market? The ongoing Chinese property crash has zero (direct) impact here. What if it is joined by US, UK, Canada and Australia?
How can one get this sort of detail, like those housing stats, into the public discourse? Government spokespeople seem to be unable to argue their real case, as if blinded by the barrage of populist accusations
We’ve talked about those stats endlessly. Not sure we can do anything other than repeat ourselves. The problem is this: to tackle the problem we need to get planning utterly reformed, NIMBYISM ended, development costs sorted, vested interests faced down. And to acknowledge that there is a global dimension as well: all successful economies have a housing problem. Part of all this is now likely to be sorted in the one way we don’t want: higher interest rates and global slowdown/recession will reduce house prices everywhere.
Saying all that, let alone acting on it, is much, much harder than saying ‘we are Sinn Fein, it’s time for change and a magic wand’. I’d now major on this: look at the U.K. and what happens when you put headbangers in charge. You want some of that? Knock yourselves out’.
I think he says he lived in a Corporation house in Crumlin. I lived in exactly the same type of house in Cabra, with parts of the wider family in F.O.T’s Crumlin. We were lucky- just 5 of us in a tiny house: bath in the kitchen, toilet accessed from outside, chimneys for tiny open fires, no central heating, insulation, sleeping with hot water bottles etc. Most of our neighbours had Big families. I knew kids who were one of ten or eleven children. How standards have changed is never taken into account in current conversation.
Absolutely. When people cite the era where there was a lack of building of our social housing stock, they tend to brush over how much investment went into retrofitting these houses to bring them up to modern standards. They also brush over how much delivery of services had to come after the build. I can think of umpteen areas in Dublin which had massive gentrification and retrofitting/ rebuilding projects.
It would be quite easy for the state to pick a big field on the outskirts of our cities, build a load of poured concrete houses with a jacks out the back and no facilities around them whatsoever. We could of course do that again, like we did in bygone eras, but nobody would want to live there.
This may help to understand the dynamics behind residential property development
Self serving, self aggrandising and opportunistic populist (tautological I’m sure) Rory Hearne pushing his book Gaffs with the subtitle “why no one can get a house and what we can do about it”
Unfortunately I felt moved to call him out, on Twitter of all places, as follows:-
“I doubt you’ve any real solutions. If you have, the rest of the developed world would love to hear them. Cos they’ve got the same problem. Imagine Rory, you’d make even more out of selling the solutions than you’ll make from writing a book pointing out the problems.
However, I suppose they’ll be solutions/proposals like:
Lower the standards of residential accommodation to what it was when our parents generation could afford a house;
Prevent people objecting to new housing;
Shorten the planning and appeal process from 2-3 years to 2-3 months;
Force property owners to sell potential sites for practically nothing;
Force developers to invest and risk their money and work for free;
Force tradespeople to work for less;
Force materials suppliers to sell for less;
Force the banks to provide finance for residential construction, at reasonable rates;
Force the local authorities to grant planning in 2-3 months;
Force more people to all-of-a-sudden enlist and immediately qualify in planning, construction trades, architecture, engineering, quantity surveying, landscaping, ecology, traffic planning, waste management, and of course to work for less.
Basically, turn the economy into a construction-focussed machine: - like it was in the Celtic Tiger years.
If you do all this, there’s an outside chance that the fabled €250k house will be achievable.
Go on Rory, admit it, at least some of these things are on your agenda.
Well said Steven. The incredible thing, or one of them anyway, is the argument he came up with to the effect that the housing crisis is a deliberate creation of FF/FG. An argument gleefully seized on by the leader of the cult that believes ‘Ireland is a cesspit creation of its neoliberal elite’, FO’T.
Ireland has more houses than ever, more dwellings per 1000 people than ever. In O’Tooles socialist paradise of 1971, Ireland had 265 dwellings per 100,000 people. Today, it is well north of 400 dwellings per 100,000 people. And there are a lot more people! So, building stuff doesn’t appear to be the problem, at least over time.
The idea that council houses of 70 years ago were of sound quality is risible. I could go on. Thanks for your comments
Is Ireland shooting itself in the foot?
Successful economy – probably the biggest threat to the continuation of this phenomenon is housing provision and lack of progress on major infrastructure provision. I don’t know if this can be solved at all and can only make a couple of observations.
Housing – apart from small niche developments in high-end areas, there is no alternative to going up. However, this form of construction is expensive. Actual delivery is a huge issue:- classic example, me and my partners would truly like to deliver apartments to the Dublin market for sale to the general public, at an affordable price (given reasonable access to mortgage funding), while making a profit for our time, money and expertise invested. But 3 years after purchasing the site, and over 2 years since initiating the planning process, we expect to be unable to fund the construction (lack of bank funding), nor make any profit, even at current price levels. There are many sites with planning permission already that are unviable (Pat Kenny will insist the owners are hoarding). Therefore, unless materials become much cheaper and tradesmen become ready to work for less, and developers work for free, I can’t see how more product would be produced if we enter a phase of falling property values. Any fall in rental levels would be accompanied by flight of capital and a collapse in construction. Ergo more shortage. I can’t see homeowners selling if they’ve nowhere else to go, however I could see Funds exiting the market, making those expensive apartments available for sale as they take losses on their way out. This wouldn’t add to the overall stock though.
Infrastructure. This is the biggie behind all our woes and future limitations.
1. Failure to invest in intercity transport means we can’t take advantage of appropriate building lands further afield than the centre of Dublin.
2. Failure to invest in a metro means we don’t take advantage of the outer city areas in any efficient way.
3. Failure to urgently facilitate what’s required to get offshore windfarms up and running.
Planning – screwed. More and more complex as we seek to avoid the errors of the past. Perhaps we could go back to a two-stage system, whereby the simple design/planning proposal was dealt with separately from all the construction detail, and let the Building Regulations, which replaced the Building Bye-Laws of old, be applied to a separate application and oversight of the works by a publicly appointed team of inspectors. Not even sure that’s an answer, to be honest.
Shortage of people everywhere. Not helped by the shortage of accommodation.
Politics, news media and constant complaints about the government, despite the relative success of the economy: Regardless, people always go for change, just to see what might happen. To paraphrase Schopenhauer: - Life is a more or less violent oscillation between pain and boredom, in the degree in which we are fortunate enough to get away from the one, we approach the other. Enter Sinn Fein. Exit the Funds behind the build-to-rent sector. Small scale landlords will have left before then if SF is looking like the next government.
Sorry, bit rambling and too long
Not at all rambling and not too long. You raise a number of issues. It does seem obvious that we need to build both up and down. High rise high quality apartments and a metro. Dublin is the only city of its size & nature in the developed world without an underground railway or very tall buildings. One warning: Vancouver, like many other world cities, has hundreds of skyscraper apartment blocks, all very high quality. And prices are still unbelievably high! Supply needs to rise to meet demand but we may be surprised by how much supply creates demand!
Your points about development costs are also well made. This is not my area of expertise. I confess to being baffled by just how expensive development is. We are in complete agreement: planning has to be thoroughly reformed and vested interests slapped down.
Ireland needs to look at the U.K. to see what happens if you swap a government of centrist pragmatists for a bunch of ideological populists.
Many thanks for your comment. Cheers.
Hi Chris, I see the sense in that, however slightly more than 50% of Irish people own their own homes without any mortgage outstanding. Given that the 50% that may be incentivised to sell in an economic downturn will need somewhere to move to, we’re back to the same Gordian Knot showing it’s ugly head again
Higher interest rates will unlikely reduce prices except in the secondhand market. And why would people sell when they’ll presumably need an alternative place to stay. I find it hard to see this unlocking any supply. More likely to retrench the market. Funds won’t be able to participate in the BtL market as the yields will have to be several percent higher and for that to happen would require higher rents and so on…..
I don’t have any magic wand either
The second hand market is where the vast bulk of property exists. Yes, new build will slow but that’s always a typical component of an interest rate/economic slowdown induced fall in house prices. Sadly. As I said, it’s not the way we would choose to lower prices. But high house prices have low mortgage rates as one of many drivers. I fear we are about to get the reverse.
I wonder in an Irish residential property context would rather modest interest rate rises have any affect on demand at all in an environment where the central bank rules tend to be the biting constraints on what people are are able to borrow?
If the deposit is the biting constraint then the energy crisis will undoubtedly eat into people’s ability to save, so that could slow demand. But if the salary multiplier is the constraint, then inflationary wage pressures amongst the better paid MNC sectors might actually produce an increase in demand.
And then you have the cash buyers, who don’t have anywhere good to put their money at the moment.
I find it very hard to forecast the house price demand given how complicated the factors are. Interest rates are just part of the picture in ireland.
I see what you are getting at. Maybe interest rate rises won't have quite the same effect as in the past. I guess the answer will in part depend on how high mortgage rates actually go. Another intriguing question arises: will the behaviour of other property markets have an impact? If, say, we see a big UK property crash because of recession and 7% mortgage rates, will that have an impact, psychologically at least, on the Irish market? The ongoing Chinese property crash has zero (direct) impact here. What if it is joined by US, UK, Canada and Australia?
Btw this link is interesting https://www.finfacts-blog.com/2020/02/irish-housing-facts-portugal-has.html?m=1
and additionally shows the current 400 dwellings per 1,000 which corresponds with the average of 2.5 person households we have in Ireland.
How can one get this sort of detail, like those housing stats, into the public discourse? Government spokespeople seem to be unable to argue their real case, as if blinded by the barrage of populist accusations
We’ve talked about those stats endlessly. Not sure we can do anything other than repeat ourselves. The problem is this: to tackle the problem we need to get planning utterly reformed, NIMBYISM ended, development costs sorted, vested interests faced down. And to acknowledge that there is a global dimension as well: all successful economies have a housing problem. Part of all this is now likely to be sorted in the one way we don’t want: higher interest rates and global slowdown/recession will reduce house prices everywhere.
Saying all that, let alone acting on it, is much, much harder than saying ‘we are Sinn Fein, it’s time for change and a magic wand’. I’d now major on this: look at the U.K. and what happens when you put headbangers in charge. You want some of that? Knock yourselves out’.
I think he says he lived in a Corporation house in Crumlin. I lived in exactly the same type of house in Cabra, with parts of the wider family in F.O.T’s Crumlin. We were lucky- just 5 of us in a tiny house: bath in the kitchen, toilet accessed from outside, chimneys for tiny open fires, no central heating, insulation, sleeping with hot water bottles etc. Most of our neighbours had Big families. I knew kids who were one of ten or eleven children. How standards have changed is never taken into account in current conversation.
Absolutely. When people cite the era where there was a lack of building of our social housing stock, they tend to brush over how much investment went into retrofitting these houses to bring them up to modern standards. They also brush over how much delivery of services had to come after the build. I can think of umpteen areas in Dublin which had massive gentrification and retrofitting/ rebuilding projects.
It would be quite easy for the state to pick a big field on the outskirts of our cities, build a load of poured concrete houses with a jacks out the back and no facilities around them whatsoever. We could of course do that again, like we did in bygone eras, but nobody would want to live there.
Great stuff
Great podcast.
Enjoyable!!