86.5 PER CENT OF NAMA LOAN PURCHASES RELATE TO LAND, HOTELS, AND COMMERCIAL PROPERTY: SO WHY ALL THE TALK ABOUT GHOST ESTATES?
Aug 23rd, 2010 by Conor McCabe
Only 13.5 per cent of NAMA loans relate to residential property developments for resale - yet listen to the newspapers, TV and radio and it’s all ghost estates this and cracked pavements that.
Anyway, the loans which NAMA has bought relate to the following:
Investment Property - 47.5 %
Land = 22.5 %
Hotels = 13.5 % - 35 hotels in Ireland and 13 outside Ireland.
Residential Property = 13.5 %
Developments (less than 30% complete) = 3 %
The figures are here.
I know that the right-wing will still make out that the property bubble was all about residential houses, but the truth is that the real damage was caused by commercial property builders and speculators, Section 23 Hotels, and bankers.
The residential property market is a sideshow. But that’s where all the bells are being rung.
This is why NAMA’s Head of Portfolio Management is John Mulcahy, formerly chairman of Jones Lang Lasalle and not, say, Frank Fahy of Shannon Homes.
A great post Conor, in a series of great posts. The talk about ghost estates is also related to the accessibility of the data at this stage (cf. Ireland after NAMA?) and the fact that talk billions and spreads and debt obscures these other issues.
That’s true, and it’s also been the interface between the developers and the general public, so it’s how ordinary people have experienced the bubble and subsequent crash.
In terms of the Irish media, though, their narrative, almost without exception, has been “this is all your fault for needing a house you selfish bastards,” when in fact the value of the ghost estates equals 48 hotels.
And it looks like Rob is back from his jollies too: http://irelandafternama.wordpress.com/2010/08/24/the-data-and-evidence-deficit-in-ireland/#comments
This’d be the “right wing” that’s come out against NAMA and the bank bailouts?!
Are you claiming to be left-wing Ronan? Welcome aboard! It’s about time you dropped the pretence of inter-right wing spats as somehow criticism of right-wing economics.
What I meant was that those economists viewed as right-wing by people who call themselves left wing, for example Constantin, are furiously against the bank bail-out and the NAMA process as economic lunacy. Unfortunately, that doesn’t sit well with the left-wing narrative.
On your broader point, the reason people are worried about residential property is because we built 500,000 properties when we only needed 300,000 (broad numbers). Most of the land is for residential development, not commercial. We’re certainly over-supplied when it comes to commercial property too but to pretend that there is no problem in residential property is truly to have one’s head buried in the sand.
One last point: the first two tranches are skewed disproportionately towards investment properties, hence the haircut will be less on those than on later tranches, when the bulk of the land and developments is moved over. The investment properties that have been moved over are NAMA’s trophies, not its millstones.
“Unfortunately, that doesn’t sit well with the left-wing narrative.”
Huh? I already said I’m not interested in inter-right wing spats. I don’t see how a couple of right-wingers arguing over the finer details of NAMA and the banks suddenly makes one of them David Harvey.
“but to pretend that there is no problem in residential property is truly to have one’s head buried in the sand.”
I agree, and it would be great if you can show me where I’ve done that even once since 2006 or where I have suggested that we should do that. I was charting oversupply when others had their head in the sand and were talking in 2007 about “renewed confidence” in the residential property market and how, even as late as 2008, the collapse in the market was due to potential buyers “postponing” purchases as prices were falling.
“The investment properties that have been moved over are NAMA’s trophies, not its millstones.”
48 hotels? Land banks? You mean it’s going to get worse?
Ronan, if you ever need a trophy, please, please, give me a call. I’ll do you a special price. No problem.
Hey Ronan, I went looking for something, anything, that you’ve written about commercial property, and I came across this post. Now, I didn’t look very hard, I only googled, so more than likely I’m doing you a disservice here, so apologies in advance. But, in the the opening of the piece you say:
“For the vast majority of the fifty years since T. K. Whitaker convinced Seán Lemass that Ireland was better off embracing rather than shunning the world economy, Ireland as a whole has been acutely aware that, as a small open economy, whether it thrives or not depends on its ability to sell on world markets. The only time we seem to have forgotten this was in the last days of the Celtic Tiger, when we convinced ourselves we could get rich selling properties to each other.”
now, apart from the fact that you need to look at Ireland’s economy 1922-1957 BEFORE you start making statements about the closed nature of that economy - as well as the fact that the core policy of the first programme for economic expansion was more cattle exports, the moves to embrace foreign investment having started in the early 1950s - it’s the last sentence which gets me - the one about how we convinced ourselves that we could get rich selling properties to each other.
Now, what I say in this post is that the right-wing would have us believe that the property bubble was all about residential houses - and that is what you say in your post.
http://tinyurl.com/382f7kf
OK Conor, we’re clearly talking at cross-purposes here and I doubt we’re going to sustain much of a readership beyond the two of us if we continue much longer. I’ve no interest in ad hominem attacks and no clue what you mean by “inter-right wing spats”. (For what it’s worth, I’m pretty sure I would fail to make the grade for either left wing or right wing.) What I said above was off the basis of what you posted above which, in my opinion, is a superficial analysis of NAMA and has led you to the wrong conclusion.
My “burying head in the sand” remark was because the title of your post is “why all the talk about ghost estates?”. The reason people talk about ghost estates is because our oversupply in residential property is at least as worrisome as in other segments of our property market. From what we can tell, there is as much residential property in NAMA as commercial property. Much more residential property in trouble will go under the radar of NAMA, due to NAMA’s thresholds.
I have spent as much time as I can analysing any numbers that NAMA deigns to give us, its shareholders. I find it odd that Google would return a post not about NAMA given I’ve written so much and I have no idea how, when I write “properties”, you infer “residential properties” as if I was somehow ascribing all our worries to the residential segment. Anyway, if you are at all interested, you can view any or none of my thoughts on the subject of NAMA here: http://www.ronanlyons.com/?s=nama (with more posts in the “Older Posts”)
To close, I will just reiterate one very important point: the first two tranches are not random samples from the NAMA portfolio, they are anything but.
Listen Ronan, I take your point about the first two tranches not being entirely representative of what’s coming down the road.
your first comment on this post, though, was a sarcastic point about right-wing and banks and NAMA. As far as I was concerned you set the tone by doing that, so don’t start coming on about ad hominem when your first comment was a sarcastic one.
As far as ghost estates go, I have broken my bolicks over the last three years analysing the residential property market, the supply of housing, and the demand of housing, prices going back to the 1970s, construction going back to the 1920s, and I’ve charted it and put it up for anyone who wants to read it. The analysis has been anything BUT superficial, and I’ve sourced everything I’ve said. I produced an analysis of the section 23 madness in the Shannon area back in 2007, when the national press in this country was calling for stamp duty to be cut as a way of saving the property market. I wrote about how the Irish property market was in collapse in 2008, and I said what a crazy idea the bank guarantee was when it was passed by the Dáil.
And now you’re saying that my analysis of NAMA is superficial because I’m asking why all the talk about ghost estates, followed by a chorus of “all youse left-wingers” etc, etc, etc.
Ronan, if you want to comment and disagree, great, I’ll learn something and maybe you’ll learn something, but you can p**s off if you think I’ll put up with sarcasm. I’m just being honest here.
It’s your call. You’re welcome to comment, I would appreciate it, but not if you’re here to sneer. I won’t stand for it.
Conor, I think you have to look long and hard at how you’ve managed to turn on someone who seems to agree with you on this issue probably 90% and maybe even 100%. (I won’t go into my track record at length, but I’m happy with it, even if I haven’t got everything right.)
I was not being sarcastic - I was annoyed at yet another irrelevant poke at tired left wing/right wing politics which I got (rightly or wrongly) from your “I know that the right-wing will still make out that the property bubble was all about residential houses…”
The property bubble was not a left/right issue, it was dumb/smart issue and an insider/outsider issue. I have no intention to turn it into a left/right issue now, hence my annoyed first comment as I have absolutely no idea how you have done so and my apologies to all the other readers for fuelling the fire with my first comment.
Conor, I think you have to look long and hard at how you’ve managed to turn on someone who seems to agree with you on this issue probably 90% and maybe even 100%. (I won’t go into my track record at length, but I’m happy with it, even if I haven’t got everything right.)
I was not being sarcastic - I was annoyed at yet another irrelevant poke at tired left wing/right wing politics which I took (rightly or wrongly) from your “I know that the right-wing will still make out that the property bubble was all about residential houses…”
The property bubble was not a left/right issue, it was dumb/smart issue and an insider/outsider issue. I have no intention to turn it into a left/right issue now, hence my annoyed first comment as I have absolutely no idea how you have done so and my apologies to the general readership for fuelling the fire with my first [annoyed, not sarcastic and certainly not sneering] comment.
(PS. Apologies if this comment appears more than once - seem to be having some technical issues.)
[your comments ended up in spam there Ronan , sorry about that. I don’t know why. Only got to them now. ]
“The property bubble was not a left/right issue, it was dumb/smart issue and an insider/outsider issue.”
Ronan, I completely disagree with that statement. It is totally against everything I have said and written on Dublin Dublin over the past three years. It is a fundamental difference between us.
As an example of where I am coming from, and the difference between us, there’s this post from last month. I think if you read that you’ll agree that any similarities between us regarding property and NAMA are entirely superficial.
http://dublinopinion.com/2010/07/25/what-the-hell-has-cattle-got-to-do-with-nama/
Now, we don’t HAVE to agree. Neither am I putting this forward as “I’m right/you’re wrong.” debate is good. It is healthy. And nobody has a monopoly on answers or analysis. and although I think I’m right, it’s certainly not a case of I know I’m right, if you know what I mean.
But, let’s be clear here. Your analysis and mine are a million miles from each other.
now, that can be a good thing as it opens up fresh eyes for each other, but I am using conceptual frameworks to analyse Irish economic and social history over an 80-yr perspective that are Marxist in approach and methodology. And a class analysis of Irish economic and social life - the dynamics of class and how they played out within Irish society over the period - lies at the heart of that approach.
And again, that’s doesn’t mean I automatically reject what you have to say - because I don’t reject it - but where I’m coming from, it’s not about right or wrong, it’s about class and how that played out within the history of this State of ours.
Hi Conor,
Thanks for that - I appreciate 100% that our Weltanschauungen (I’ve always wanted to use that word!) are quite far apart. What I was referring to was the analysis you gave above of the property market, which is very much a “neo-classical”/”right-wing”/mainstream economic analysis using concepts of supply and demand.
Any such economist, such as Dan O’Brien or David McWilliams, with his senses still working during the bubble would and did use the exact same terminology to describe the bubble as you did and to highlight the exact same problems.
I would totally agree, though, that the back-stories that you or they/I would have for the (long-run) period leading up to and indeed surrounding and after this event are probably completely different. Here’s a go at the simplistic version: you regard NAMA as a continuation of the ongoing problem, I regard it as an idiotic solution.
I doubt we’re going to sustain much of a readership beyond the two of us if we continue much longer.
Not true. Good discussion.
“you regard NAMA as a continuation of the ongoing problem, I regard it as an idiotic solution.”
Actually, that’s pretty much spot on. For me, NAMA is completely logical. It is the indigenous Irish monied class closing ranks and protecting itself. It makes sense, because it is how they have treated this country since 1922.
“you gave above of the property market, which is very much a “neo-classical”/”right-wing”/mainstream economic analysis using concepts of supply and demand.”
For this, though, I’d suggest that you need to read a bit of Marxist economics. The only two Irish economists I know of who have a background in Marxist economics are Michael Taft and Michael Burke - and in general when Irish economists talk about Marxism it’s a bit like Pat Kenny talking about football. No offence but I’m guessing you haven’t read much Joan Robinson or David Harvey, or even volumes 1-3 of Capital. when it comes to analysing the present mode of production, there is a richness in Marxist economics which is completely overlooked by the mainstream. Not always, though. For an example of a mainstream economist using Marxism to make sense of what is going on with the international economy, have a look of this. It’s a short video by Cliff Bowman, Professor of Strategic Management at Cranfield University School of Management, and he’s explaining the current crisis via Marxist economics.
http://www.youtube.com/watch?v=-e8rt8RGjCM
You really could do worse Ronan than buy a copy of Karl Marx’s Capital and read it through. It’s tough-going but I found the accompanying online lectures by David Harvey to be a Godsend in reading Capital. They are available here.
http://davidharvey.org/reading-capital/
“Any such economist, such as Dan O’Brien or David McWilliams, with his senses still working during the bubble would and did use the exact same terminology to describe the bubble as you did and to highlight the exact same problems.”
Ugh! Ronan, I don’t know why you bother with O’Brien or McWilliams. I really don’t. They’re both snake-oil merchants. when I said earlier on that I don’t reject your analysis it is because I can’t simply reject it, because, unlike those two, what you say is based on facts. It doesn’t mean I agree with you but it’s empirical, you know? Those two, ugh! Jesus wept! I mean, how does “The Generation Game” explain the Ringsend Bottle Bank, or Anglo Irish? It’s a joke.
As for O’Brien, well, here, give yourself a laugh.
http://dublinopinion.com/2009/05/19/dan-obrien-cut-minimum-wage-fuck-yeah/