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Archive for July 30th, 2010

The National Institute for Regional and Spatial Analysis (NIRSA), a university institute at the National University of Ireland at Maynooth set up in 2001 “to undertake fundamental, applied and comparative research on spatial processes and their effects on social and economic development in Ireland”, has produced a working paper which draws together much work undertaken by NIRSA on Irish ghost estates, overproduction of housing, planning and the Irish response to the banking and property crisis.

The working paper has received widespread media coverage, in particular its call for a specific inquiry into the property bubble and related planning issues. The paper examines the property bubble in particular from 2000 onwards, planning, overproduction, the property boom and bust. NIRSA received much coverage at the start of 2010 when its work on vacant residential property and ghost estates was published. It is noteworthy that NIRSA have revisited their estimates of vacant property and are now estimating just over 200,000 properties vacant (defined as base vacancy plus overhang), which places NIRSA somewhat below other studies such as UCD’s and DKM’s. Apparently the DoEHLG is in the process of counting vacant property and I would not be surprised if the results show that there is much less property that could potentially be made available for sale than the recent studies would imply – – according to research by Federcasa (the Italian Housing Association – used as a source in the recent UCD vacant homes study) in 2005/6, Ireland has had a vacancy rate of 10.2%  even back in 1991 (the source is credited to “National Statistical Institutes, Ireland and the DoEHLG”), it may turn out to be the case that the potential supply of vacant property that can be made available for sale might be in the area of 100,000 units – hopefully the DoEHLG will provide comprehensive statistics later in the year.

Of particular interest here is NIRSA’s consideration of NAMA, and NIRSA is cautious about NAMA’s operation and prospects. Although the report doesn’t introduce new data in relation to the operation of NAMA, it does draw together a number of concerns about how NAMA is operating:

Lack of transparency – this is a subject touched on by many previously including the Ombudsman and Information Commissioner, Emily O’Reilly – all calling for NAMA to be included within the Freedom of Information. The thrust of the NIRSA call for transparency however originates from a different angle and NIRSA want NAMA to share information on their assets to assist in the orderly planning of housing and infrastructure. This call echoes recent calls from local politicians and county managers for example in Cork and Westmeath. NIRSA also raise concerns over the way in which NAMA is valuing loan assets, stating “It is also not clear as to how valuations are being made and whether they take into account existing levels of oversupply and evidence-informed, long-term projections of an area’s demography and labour market.”

Risk of losing money – NIRSA highlight the fact that NAMA is controversially paying in excess of what property is worth today (more accurately what it was worth in November 2009) by paying the Long Term Economic Value. NIRSA point out “Land in areas of high surplus housing and/or over-zoning is likely to fall greatly in value and to stay that way for quite some time, limiting the ability of NAMA to realize any profit, especially if it is acquired for too high a value”. It is of course to be hoped that NAMA have conservatively valued property. NIRSA’s own study on vacant property in the State however was published after 10th January, 2010 and according to the NAMA LEV Regulation, any analysis produced after this date cannot be used in valuing the LEV. NAMA may be able to use a DKM study from September 2009 but that study did not indicate the location of oversupply. NIRSA also express a concern that NAMA may pay for property subject to zoning which may then be de-zoned.

The negative impact upon the existing residents of ghost estates by NAMA’s decisions regarding empty or partly built houses – firesales (might worsen negative equity), leasing for social housing (might concentrate social difficulties – “creating new Ballymuns” as one commentator remarked), hoarding (will mean that existing residents continue to live without neighbours). There is an appeal for NAMA to meet the civilized expectations of people trapped in ghost estates.

There is also an examination of the context which gave rise to NAMA and whether it is an “illogical logical” construct and NIRSA question whether in principle an operation like NAMA, which may seek to re-inflate the property bubble and protect what many would call elites, is really what Ireland should be doing at this juncture.

The main part of the paper however doesn’t deal with NAMA, it examines the context for our property crash and does so with clarity with rich supporting statistics. A worthwhile document that deserves widespread media exposure.

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