Saturday 1 October 2016

The right moves: Election non-result may hurt property market

Paul McNeive

Published 03/03/2016 | 02:30

It's important for the market that a period of political instability does not become protracted.
It's important for the market that a period of political instability does not become protracted.

The general election result has teed up a period of political instability and it is important for the market that that does not become protracted. Whilst investors, financiers and developers can live with some instability over a few months, anything much longer than that, particularly if it involves another inconclusive election, risks damaging what is a relatively new and sectoral recovery.

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The property market thrives on confidence and introducing uncertainty inevitably leads to a slowdown in activity. Purchasers and tenants, if at all worried about protracted political or economic instability, quickly adopt a "wait and see" approach, which leads to deals falling through and eventually reducing values. Given our reliance on overseas equity funds, both as wholesale purchasers of property and as a badly needed source of development finance, we need to be careful that they do not turn elsewhere for opportunities, whilst waiting for the situation here to settle down. Just as it is predicted that protracted uncertainty will lead to an increase in bond yields and Ireland's cost of borrowing, if investment property yields move out, this will come at a cost to the taxpayer as Nama's remaining portfolios lose value.

The outgoing government had mixed results on the property front. They displayed common sense in not following through on the notion of introducing retrospective downwards rent reviews and they judiciously used tax incentives to stimulate the investment market. Whatever one's view of the strategy behind Nama, the government worked its bad bank to good effect.

Where government got it badly wrong was failing to recognise the severity of the housing crisis, both private and social, which was obvious three years ago. Fine Gael's instinct was that "the market will sort it out" but the market and construction sector were not functioning normally. Labour's political instincts should have seen government getting swiftly involved in direct provision of social housing, but they could not make it happen.

A further factor in that has been a reduction in the capacity of the local authorities to respond, because of the decrease in the numbers of engineers, architects and surveyors on their staff, although that is now being reversed. The government's inability to deliver infrastructure is underlined by the emergency announcement last October that 500 temporary "modular housing units" would be provided as a short term solution to the lack of social housing. Months later, not one temporary unit has been installed.

The general election has not delivered the result that the property market would fear most, that is a significant increase in the proportion of radical left politicians.

It is now incumbent on the centre parties to establish stability. If Fine Gael could be accused of losing touch with the electorate, then Fianna Fail will surpass that, if they don't coalesce with Fine Gael to form the stable government which the people want.

Project management skills are widely utilised in the property and construction business and The Project Management Institute (PMI) Ireland Chapter will hold its annual conference at the Aviva Stadium on April 14. Whilst project management skills are mostly associated with construction and development projects, in my experience, they can also be usefully employed in agency roles.

"Project management" is all about planning, controlling and delivering work to meet specific goals and my introduction to the discipline came about through the Head of Human Resources in the estate agency I worked with, who was using project management skills to deliver HR related tasks. We became interested enough to have a number of directors undergo basic training in the discipline and we put those skills to good effect in handling large multi-property instructions.

These techniques became a real differentiator when pitching for work and were effective in showing clients that we were organised and capable of handling complex instructions. Indeed when our own company was being sold and we were going through a complicated due diligence process over several months, all of the work involved was organised in the "project management" model, which kept everything on track.

I am honoured to be the keynote speaker and MC for the annual conference. There are over 1,000 members in the PMI Ireland Chapter, from a wide range of industries and speakers See pmi-ireland.org for full information.

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