Government needs to help breathe life into market
The amount of capital being made available in the current market is being strangled by the financial institutions who are refusing to lend to developers to finish out existing development or to purchasers who which to purchase units.
This is putting unnecessary strain on the already negative sentiment in the residential market.
The Central Bank and Government departments need to investigate this practice and take whatever measures are necessary to return liquidity to the residential market.
In addition to that, the banks are continuing to raise the interest rates for home loans at faster rates than the ECB is raising their rates.
Again the Central Bank needs to intervene in this to ensure the banks don't take advantage of people that may already be struggling to stay afloat and repay their home loans.
People are being constantly hit with increased mortgage repayments, food prices and petrol prices and as increases in fuel and heating bills may push some borderline people over the edge, these should be postponed.
Fuel prices are hurting every facet of business as well as the person on the street.
While crude oil prices are outside of the control of the Government, the VAT rates on petrol are significant and the Government should reduce that to make petrol more affordable.
The nationwide infrastructure investment planned by the Government must be protected from cutbacks by the bureaucrats in Dublin. This infrastructure investment is critical to the ongoing success of business nationwide. If required, the Government should borrow funds to ensure this proceeds.
While retail sales have dropped nationwide there are still a significant number of retailers in the market with expansion plans.
They view Ireland as a medium to long-term winner and acknowledge the short-term pain is worth taking. Certain areas of the country have been overdeveloped from the retail prospective but other areas are undeveloped and developers/retailers are targeting those area.
Many of the sensible Irish developers targeted the international market years ago in order to ensure they weren't over reliant on the overheating Irish residential market.
Chieftain was one of those and is still actively developing in the United States, South Africa and the United Kingdom. Each of these countries has been hit to varying degrees as a result of the worldwide credit crunch and the sub prime lending market. However, within each country there are cities/development markets that remain buoyant. Chieftain is confident that these markets will recover (some more quickly than others) by 2010 and consumer confidence will return.
Despite the proliferation of gloom in the national press there is still significant value and quality product available in the Irish residential market.
Outside of the major metropolitan area land price expectations remain more realistic and therefore house sell prices are significantly more affordable.
Chieftain is still continuing to actively developing residential units in Keatingstown, Wicklow Town, numerous sites in Limerick and Bweeng, Co Cork. While sales have slowed significantly from the peaks of 12 months ago, there is still a steady stream of buyers out there for developments that offer value in the right locations.
The slowdown has resulted in a built-up demand that will need to be satisfied once people are more confident in where the economy is going and banks lease their current stranglehold on fund liquidity.
Currently Chieftain's product is offering significantly better value than the headline figure from the greater metropolitan areas of Dublin, Galway and Cork City. With that in mind Chieftain is preparing to open new sites in Knockrobin, Co Wicklow, Coonagh, Co Limerick, and Castlemartyr, Co Cork, to be in a position to react to this future demand.
We anticipate this positive correction in the sales demand figures will happen in early 2010 and until then developers will be in survival mode which will unfortunately result in additional job losses across the industry.
Ger O' Rourke is chief executive Chieftain Group.
- Ger O'Rourke
