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 Post subject: Noonan Responds
PostPosted: Wed Jan 21, 2015 10:08 pm 
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I wrote an irate letter to Ministers Burton and Noonan in September after reading two articles in the Sindo where Brendan McDonagh was quoted as saying that house prices have to go up further because NAMA's builders cannot make a profit. He was also quoted as saying that he is glad that Noonan has agreed to delay new construction initiatives to deliver new supply as this may put downward pressure on prices. I don't have a quote but I'm pretty sure some resourceful Pinster can find them (23/09/14). Below is the response I received from Noonan's office. I thought it might interest people

Quote:
Dear Mr Augustus,



The Minister for Finance, Mr Michael Noonan TD, has asked me to thank you for your email of the 23rd of September 2014 and to advise you that the Minister has no role in relation to the day-to-day detail of NAMA's sales strategy which is a matter for the NAMA Board.



The comments in the article referred to reflect Mr McDonagh’s opinion based on his experience. It is my understanding that breakeven cost of construction to which Mr McDonagh referred during his presentation do not include historical acquisition costs but rather a notional site cost reflecting current market conditions. I would point you towards Mr McDonagh’s full presentation on that day which may be of interest and can be found at,

https://www.nama.ie/fileadmin/user_uplo ... Donagh.pdf



I can assure you the Government is taking this issue of housing supply seriously under the framework of the Construction 2020 strategy. Under Construction 2020 we are evaluating a number of potential impediments to the residential property market reaching a sustainable equilibrium. Over the long-term house prices should be a function of income and construction costs as opposed to future expectations around land values or rents driven by a shortage of supply.



One area we continue to evaluate is the cost of construction. Mr McDonagh’s point is technically correct, unit prices do need to rise to encourage additional construction to provide sufficient returns on investment after costs. In many areas unit prices are currently below replacement cost. As you rightly infer, a continued rise of house prices is leading to affordability issues which will act as a ceiling to how high prices will be able to rise. However, rather than accepting increasing prices as an inevitable result of high costs of construction, we are evaluating the flexibility (or lack thereof) of construction costs in terms of sites, capital and financing, labour, materials, levies, and planning and regulation.



We intend to make continued progress in this area through our ongoing work on Construction 2020 in partnership with all stakeholders including the Department of the Environment, Community and Local Government, planning authorities, local authorities and industry bodies and ultimately remove impediments to our housing market reaching sustainable equilibrium.



Yours sincerely





________________


Private Secretary


So basically in the midst of all the fudge, essentially it appears that he is saying that house prices should continue to rise


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 Post subject: Re: Noonan Responds
PostPosted: Wed Jan 21, 2015 10:14 pm 
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Planning Tribunal Attendee

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Could you share with us the letter you wrote, the better to evaluate the reply?


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 Post subject: Re: Noonan Responds
PostPosted: Wed Jan 21, 2015 10:19 pm 
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Too Big to Fail

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Quote:
Over the long-term house prices should be a function of income and construction costs as opposed to future expectations around land values or rents driven by a shortage of supply.


The length of the long term is what you're misunderstanding. I'm pretty sure there was a report in the 1960's that made the exact same point, here he is simply saying that the feasibility of that approach will be fully understood by 2020. With that in mind there is little doubt that a policy to implement a policy to make housing price subject to income and construction costs should be well into green paper territory by say, 2030. None of this stuff happens overnight! I'd say you could have a situation whereby policies are in place to allow house process to be subject income and construction costs by 2060 at the latest. Long term is 100 years by this estimate, but of course there are no guarantees.


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 Post subject: Re: Noonan Responds
PostPosted: Wed Jan 21, 2015 10:45 pm 
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CBMD wrote:
Could you share with us the letter you wrote, the better to evaluate the reply?


Here is the letter I sent to JB

Quote:
Dear Joan,
I am writing in relation to the matter of housing, after I was particularly encouraged by your comments that you would make provision of housing a key goal for the government in the years to come. I appreciate that this is not an easy matter to address since there are numerous vested interests at play, not least of whom are home owners in default and in negative equity.
I note with grave concern the comments by Brendan McDonagh of NAMA in this morning’s Sunday Independent that house prices in Dublin need to rise further since the agency is unable to get its developers to build at current price levels. Mr. McDonagh states that building at current prices would not be profitable for them. To me this represents ‘The Tail Wagging the Dog’. The issue is that the developers bought sites at the peak of the boom. They are unable to turn a profit because the site costs were too high. Artificially inflating house prices back to 2007 levels by strangling the supply of housing is not the answer. This will only ensure that these speculators become multi-millionaires on the back of young people over paying for houses while only seeking to provide basic shelter for their families. This to me is wrong on so many levels.
A better strategy would be for NAMA to enforce its security over these development sites and bring in real builders such as listed companies from the UK, to develop the sites for them. Any upside could then be passed onto the tax payer rather than a failed developer. It would also ensure fairly priced homes for young families and could include a 10-20% Part V element. Giving guarantees of 10% to banks to fund said young couples is not the answer as this will only lead to further house price inflation.
If Mr. McDonogh gets his way, I fear that this will inevitably lead to another housing bubble, indeed we may already be in the midst of one. The price of a modest 3 bedroom family home in many ordinary areas of Dublin is now running well in excess of EUR 350k, making it a factor of over 10x the average national wage. To me housing should not be a revenue generating exercise for the state or a way to make failed developers multi-millionaires once again. If NAMA gets its way however, this is exactly what we will get. The social and economic consequences of such policies will be felt for years to come and you are the only person who can change this direction.
Yours sincerely,

Caesar Augustus


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 Post subject: Re: Noonan Responds
PostPosted: Wed Jan 21, 2015 10:46 pm 
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Too Big to Fail
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Quote:
One area we continue to evaluate is the cost of construction. Mr McDonagh’s point is technically correct, unit prices do need to rise to encourage additional construction to provide sufficient returns on investment after costs. In many areas unit prices are currently below replacement cost.


Could the cost be reduced somehow? Hmm. It must be impossible for costs to come down as they don't even address it in their rationale. Their hands are obviously tied and there's nothing can be done to reduce unit costs.

How does the home renovation scheme work again or the capital gains exemption? They must not involve any tax incentive because it doesn't seem to be an option the government can take.

Fees, rates, charges and taxes. These are all obviously ratcheted where construction costs are concerned. They can either stay the same or change in one direction only i.e up.

_________________
The real damage is done by those millions who want to 'get by'. The ordinary men who just want to be left in peace. Those who don’t want their lives disturbed by anything bigger than themselves. Those with no sides and no causes. Those who won’t take measure of their own strength, for fear of antagonizing their own weakness. Those people who roll up their spirits into tiny little balls so as to be safe. Safe?! From what?
Sophie Scholl


Last edited by Dubhgeannain on Wed Jan 21, 2015 10:47 pm, edited 1 time in total.

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 Post subject: Re: Noonan Responds
PostPosted: Wed Jan 21, 2015 10:47 pm 
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Good letter. Fair play for sending one.

_________________
— Try, fail, understand, win. —


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 Post subject: Re: Noonan Responds
PostPosted: Wed Jan 21, 2015 10:56 pm 
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Yes, good letter. I wouldn't describe it as irate, like you did. That's why I asked.


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 Post subject: Re: Noonan Responds
PostPosted: Wed Jan 21, 2015 11:07 pm 
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CBMD wrote:
Yes, good letter. I wouldn't describe it as irate, like you did. That's why I asked.


Maybe the letter wasn't irate but I most certainly was :lol:


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 Post subject: Re: Noonan Responds
PostPosted: Wed Jan 21, 2015 11:32 pm 
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Mantissa wrote:
Good letter. Fair play for sending one.


+1


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 Post subject: Re: Noonan Responds
PostPosted: Wed Jan 21, 2015 11:52 pm 
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Joined: Apr 29, 2009
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Yes an excellent letter, however I suspect your future in this country is somewhat limited*. Let's face it there will always be enough faintly dim bankers, even more dim insurance industry workers and completely clueless political party workers of various hues sent over the top into teeth of your gunfire to ensure your position is taken.

* or at least you will be forced into one of the Pinster ghettoes (IT etc.) to live out your days


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 Post subject: Re: Noonan Responds
PostPosted: Sun Jan 25, 2015 6:44 pm 
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I've wrote to Leo Varadkar with questions related to lack of medical service for my son.

Answer was similar: "I am not responsible, it is HSE". HSE responded with complains about low budget.
Why would I give a damn about their budget problems? I pay more and more direct and indirect tax and I do not get anything from the state.
Therefore, why the people in power claim they have no power?

Who runs this Island then?
Google? Goldman Sachs or some spooky powers?

Republic of Joke.

_________________
Why it was so windy there?... I am out.

For future reference, a 'soft landing' theorem:
06/2007: Central Bank predicts soft landing for housing
http://www.independent.ie/business/iris ... 96858.html
It's all grand


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 Post subject: Re: Noonan Responds
PostPosted: Mon Jan 26, 2015 12:06 pm 
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Rupublic of Smoke (and daggers).

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 Post subject: Re: Noonan Responds
PostPosted: Mon Jan 26, 2015 3:22 pm 
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Joined: Jun 15, 2008
Posts: 611
mightyz wrote:
I've wrote to Leo Varadkar with questions related to lack of medical service for my son.

Answer was similar: "I am not responsible, it is HSE". HSE responded with complains about low budget.
Why would I give a damn about their budget problems? I pay more and more direct and indirect tax and I do not get anything from the state.
Therefore, why the people in power claim they have no power?

Who runs this Island then?
Google? Goldman Sachs or some spooky powers?

Republic of Joke.


Given Varadker controls the budget, would you not write back and ask him to comment on HSE claims?


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