Property is key part of economic recovery but a strategy is needed to avoid mistakes of past
DEVELOPER Michael O'Flynn believes 2013 will see the beginning of a recovery in the property market and that 2014 could even see a house "price bounce", beginning with Dublin and Cork.
"The metropolitans, Cork and Dublin and those areas, will come back first. But we need a strategy to make sure it comes back and a strategy that shows we have learned from the bubble so we don't make the same mistakes, but provide for the country's future needs," Mr O'Flynn – who is one of Nama's 10 biggest developers – told the Sunday Independent.
Commenting on the outlook for 2013, he said: "Next year is an inflection year really where you're going to have to see a lot of changes. The property sector has one major problem and that's funding. Nobody is putting their money into property and understandably so, but the country needs a national property strategy because property is an intrinsic part of the economy. You're not going to have a functioning economy without a property sector."
Clearly conscious of the widespread public antipathy towards developers, he added: "I think a lot of people in a lot of places would love to have eliminated property, property people and all that's associated with it, but that's too simplistic an explanation because property is involved. . . in a lot of areas where employment will be key to the future of this country."
Asked for his views on the major overhang in the supply of property across Ireland, he said: "I hear a lot of people talking about overhangs in [housing supply], but an overhang in a country town which never should have gotten planning permission let alone funding is a different overhang to a metropolitan city. I can't understand why no market assessment was done before planning was granted. In the same way, I can't understand why nobody is doing a market assessment now of the likely needs. That's why I think a national property strategy is needed urgently.
"Nobody wants to talk about property and that's somewhat understandable given where we've ended up. But to not do this [strategic review] now is going to be problematic in the future. I think a lot of housing shortages will show up in the next 12 months. I do think 2013 is going to be the inflection year really in terms of change. I think people are going to begin to realise that there has to be a supply and correction."
Mr O'Flynn said that while there would be a recovery in property prices, he urged the Government to come up with a strategy to ensure that the future supply of property would be directed solely towards servicing the country's needs.
"That's all property should ever have been doing. . . servicing the need. It shouldn't have been about everybody getting into property. That's unfortunately what happened. Everybody got into property and the banks funded everybody to get into property. There has to be a strategy for property . . . I think government will have to give us that strategy so that it's okay to lend to property, so it's okay to be in property and it's okay to own property."
Asked about the growing shortage of suitable commercial space for international companies interested in locating in Ireland, Mr O'Flynn said: "We now have a position where nobody is interested in funding the property sector and the FDI buildings are running out. When it comes to Dublin, Cork and to a lesser extent Galway and Limerick, the amount of suitable space is actually running out. Unless there is a strategy to deal with that, you're going to have a shortage of buildings which can't be resolved overnight. It might take two years at a minimum to create space that is badly needed in the short term. I think it's a situation that the Government will have to deal with."
Referring to the type of funding he would like to see coming into the property market, he said: "Funding means institutional money and international equity, not people who are coming in to make a quick turn; they should be avoided. It would be another mistake now to start selling property portfolios to people who might be selling again in a year's time. We need people who are going to be long-term investors."
Asked for his views on Ireland's overall economic health, he said: "I think the economic situation is being put on a stable footing and hopefully with that we will be in a position to focus on some of the issues underneath. And I think when that happens, people will realise property is an area that needs and has to have investment. With careful investment, I believe this coming year will see people realising there is an issue. Will we see the investment? I hope so. I think there will be a price bounce. It's unlikely this year, but probably next year . The supply running out is probably the best thing that could happen because then people will realise that we have to get on with the future. While we are dealing with the past, nobody wants to think about the future."
The O'Flynn Group chief called on Nama to look to the future too, adding: "Nama. . . must look forward rather than looking back. I don't think we can have a future property market without a proactive Nama. I know they have made some plans for investment with working capital, but I do think they need to have a more open policy for people investing in property in this country . . . if that happens, we might see some recovery."