NOEL O'GARA

 

 

THIS LETTER WAS PERSONALLY DELIVERED ON MY BEHALF TO THE FINANCE MINISTER BY HIS AUNT MARY O'ROURKE, MY LOCAL TD, IN JANUARY 2009

HOW TO REVIVE THE IRISH ECONOMY AT THIS TIME.

ACTION NEEDED.

ASSEMBLE A TEAM OF BUYERS AND CONTRACT TO BUY 1000 HOUSING UNITS IN RAPID TIME.

THIS WOULD COST APPROX150 Million. Being 1000 units at 150,000 average per unit.

That is about 10% of the 1.5 billion which the minister promised Anglo Irish Bank to recapitalize it and a small fraction of what might eventually be needed to shore up the balance sheets of the banks.

Only the state has the resources to embark on such a major innovative and bold investment plan. It would be an investment in solid asset backing, income yielding, good quality new property and couldn’t be faulted.

The alternative is to shovel unlimited funds into a black hole that nobody can understand or see the end result. Speed and confidentiality are fundamental to its success because the state could successfully cream off a thousand or up to ten thousand housing units before anybody realized what the plan was. Once the market recovers, the state would be sitting on a substantial profit having bought their stock at fire sale prices. When the market recovers the state just withdraws from buying without informing the market.

Results of that plan

It would take the glut of houses off the market before anybody realizes it.
  1. The market would then start to buy, realizing that the rock bottom bargains were not going to materialize.
  2. That would restore confidence in the market.
  3. It would put a floor on house prices at last.
  4. It would underpin the banks securities held in mortgages and save the banks.
  5. It would signal to young house owners that they would be taken out of negative equity very quickly as the market would slowly recover.
  6. It would save the banks from falling flat on the floor because at present there is no end in sight to the falling values of their security and the downward spiral that they can’t halt or reverse.
  7. It would revive stock market interest in bank shares and renew investment interest, thereby saving the government from rescuing them, an impossible feat anyway.
  8. By the same logic, all pension funds would recover.
  9. Anglo Irish just might survive without the present unquantified loss of billions to the state which would have to be funded by external borrowing.
  10. Builders would recommence building to finish off their developments.
  11. That would mean jobs and take thousands off the dole very quickly.
  12. Investors who are waiting to get the rock bottom bargains will come into the market once they realize those bargains are being snapped up.
  13. The housing stocks acquired could be rented out at commercial rents giving a secure income to the investment.
  14. The government would then have an additional and diverse new stock of housing units at its disposal for all their plans and to house the homeless.
  15. As soon as the prices harden the buying can cease and the market would be revived at that stage.
  16. No necessity to borrow abroad to fund that black hole in the bank finances once the market revives.
  17. Jobs and confidence restored and national morale restored.
The prophets of doom would be silenced because the change could be induced within 90 days easily, with results showing within 30 days.
Take Athlone for example. If four of five of the Athlone developers were able to offload their remaining hard to sell houses, say twenty or thirty units in a few days, that would change the depressed property scene in Athlone within a week as word got around that they were selling and restore confidence amongst auctioneers and the market would change.

16 th January 2009

Noel O'Gara 0906430107 0876818520.

 

 

There was no response from Mr Lenihan.

 

Brian Lenihan, the lawyer, blustered his way ahead with the advices of academics and civil servants who had no business expertise. The arrogance of attempting to pretend that he could rescue a drowning economy without recognising the necessity of having a united front which was essential to retain confidence and give a breathing space in which to cut costs and put the national budget on an even keel, was unforgivable. The opposition opposed him at every turn and the world's media watched the argument and gradually withdrew their credit.

So as the economy worsened through Summer 2009 and the debate on NAMA intensified I decided to add the Lenihan letter to that debate.

The letter was posted on the propertypin website forum on 25th July 2009 and drew a large but mixed response. I was told to change my name to a pen name as per their rules so I changed to the name of themainman therafter.

These are a few responses.

watch+wait 'Unfortunately we do have smart people in power, the difficulty is they are not working for the majority of people, just those that bribe them.

My reply 'my view is that the lawyers and teachers who run this republic are only smart on holding on to the reins of power for its sake and not for the benefit of the people. There isnt a businessman amongst them who has an ounce of wit.
They have turned the republic of free people into a bureaucracy where they have control of everything you do and those brainless planners have created a nightmare scenario for all of us.

'perhaps I should have explained that buying houses or flats at an average of 150k last back end would have been about 100k off all the 2007 inflated prices and those levels would have enabled a lot of developers to just get out about even, that is without a profit They would have gotten out but not be bankrupted by it and have lost their exhuberance for development.
I agree with you that NAMA is just a recipe for national bankruptcy. But it is a solution also as every ostrich knows. That guy Bacon who talked Lenihan into it was a failed developer himself so how on earth could he rectify what he helped to screw up? He was just saving himself and his mates. Lenihan's problem was that he himself being a barrister out of his depth hadnt a clue and Bacon had a good reputation for some old reports he produced and obviously he is a smooth operator at dispensing platitudes and solutions. Lenihan bought it just to get it off his own back as the only solution.
Allowing Anglo to fail was the other option but that was a nightmare scenario that would have dragged the other banks down with it. If that happened the whole country would have to close down period and that was Lenihan's dilemma that some here dont seem to realise.
I have tried to offer a workable solution to a crisis that affects us all so lets be serious.
Just imagine no banks open and there would be blood on the streets as people looted shops and just sat at home waiting for the news when it might be safe to venture out for a loaf of bread. It would mean martial law and curfews and make no mistake about it Cowen would be very willing to call on our national army to protect the state from itself and there are contingency plans for just that scenario. We would be like Haiti within a few months so lets cut the crap and recognise the reality that Lenihan at least could envisage. He had to find a way out and Bacon presented one that we all seem to agree is a get out for the developers and bankers at our expense but its not as simple as that.

Now back to where we still are for now because the future is uncertain and my solution was put here for debate because I thought there were some serious business brains looking in here and people who know a thing or two about property and investment.
I think it was David McWilliams, an indo academic lad who advocated a bad bank which NAMA will become and I wonder if he was involved in that decision also or if he influenced it.

 

mark wrote. 'A few empties bought off them wouldn't make a difference.'

My reply. I suggested buying about 1,000 units but if we ramp it up to 10 times that or 10,000 units bought by the state that would have cost about 1.5 billion.

thats what he gave Anglo as a deposit and you say that taking 10,000 units off the market would make no difference????
It would have revived the market and brought out buyers to get a few of the bargains and taken everybody out of negative equity etc etc. I do know that you can change a market in any commodity if you set out to do that. Its easy. Go into your local shop and buy up all their vegetables in one go and watch the fun as the housewives run elsewhere to buy their stuff because the farmer supplier wont be back until the next day.

room305 wrote.'Um. Achieving what exactly? Permanently higher vegetable prices? Unless the green grocery is pretty stupid there's only one patsy he'll be selling at inflated prices to the next day.'
Perhaps you announce you will arrive every morning and buy all the green grocer's vegetables until such a time as he doubles his prices. Guess which player in this scenario goes broke and which one gets his vegetables delivered every morning in an eighteen tonne dumper truck?

My reply. you are missing the point. The OP was just showing how easy it is to interfere in any market on a very basic level using the example of vegetables for the benefit of the uneducated. You clearly dont understand that supply and demand dictate prices for all commodities. Limit the supply and the price goes up until others, attracted by the higher prices fill that vacuum with their supplies. Then you get a levelling out of the market and the price. That is the basic rule of supply and demand. Flood a market with veg and the prices go down until you give up and get out of it because you cant make profit.
Ireland is now flooded with houses and flats and there are about 60,000 units on the market. Cream off the surplus and the market would recover.
I concur that only the state would have the ability do this and they have already spent several billions of borrowed money on a black hole that has no bottom. Surely it would have been better invested in buying up that surplus that could have breathed life into the housing market again. It would then own all that cheap property on behalf of the taxpayers which it could use to house the poorer people at affordable rents.

However somebody would need to stop builders building more houses because if that pyramid of houses in the planning pipeline is continued as a result of the NAMA bail out then we are all up the creek with no turning back and the market will never level out. Its all the work of our brilliant planners who handed out planning permissions to their favourite builders for massive contributions, their word for bribes. Ireland simply doesnt have the inhabitants to move into them all. The dishing out of planning permissions was just a massive pyramid bubble that has burst because supply was never tailored to demand.

NAMA is an unworkable solution simply because nobody seems to know what it means or how to bring it about. It will just be another gravy train for lawyers investigating titles and taking disputes to the courts. Heads they win. Tails you lose. The whole idea of NAMA was to prop up the prices of housing so that the builders vast bank loans could be stored away in that phantom bank, therby giving our politicians the ability to feed the delusion that it is not lost money and they have rescued the economy that they screwed up.

you must realise that the guarantee by Cowan's government is about as useless as a cigarette is to a drowning man.
It can never be called in because the drowned man is drowned. He is beyond resusitation. Therefore all the noble rules you propose are illusory and clutching at straws.
Those massive losses have been made and the government are trying to pretend that they didnt happen and are mummifying them in NAMA to create that illusion.
Its the Bacon solution. Shelve the losses and pretend they didnt happen. Blame the world economic collapse to stay on top at all costs while borrowing to keep your bloated administration afloat.

Developers massively overpaid for land with planning permission and banks foolishly financed that pyramid and when the music stopped the money was gone and the debt remained backed up by unsalable and much reduced in value land.
When the banks started selling off their premises somebody in government should have smelled a rat.
When thousands of new houses along the West coast remained unoccupied back in 2006 why did nobody say hold on?
When the new builds were being occupied by foreign workers in the main how come nobody noticed?
Our government blamed the regulator. He blamed the banks. The banks followed the market because our government had sancioned the planning, the building and the tax breaks that encouraged unsustainable building.
Our government allowed the stock market to be turned into a gambling casino with the device known as CFD's which encouraged Sean Quinn to gamble so badly that he caused the house of cards to collapse. Instead of being an investment facility the stock market became a casino under the gaze of the government who never cried halt.
Quinn's crash precipitated the Irish recession with Anglo going into freefall and being exposed for what it was.

 

the unwelcome guest wrote.'You forgot the haircut that NAMA buys the loans at, which means we're on a figure of somewhere south of 70 bn of crap with some of it performing according to Lenny, enough to repay the interest on the bonds apparently...

But yes, in effect, NAMA turns Ireland into Delboy in a three wheeler trying to get rid of knocked off goods..'.

 

The sudden collapse of our economy is worsening while all the pundits think this will not affect them and will pass in a few years and normalcy will return.
While pinsters may wish to document the losses that will not restore them or help in any way.
Its done. We live in a failed state, driven on to the rocks by dimwit politicians.
They stole the market forces from the businessmen and women of this republic in favour of a nation planned by them. That’s the basic cause of our economic demise.
Our elected representatives have stolen the free market economy from the people and replaced it with planning laws and tax schemes to outdo the Brits.
All their plans handed down to developer pals by council planners have now been exposed as unsustainable and grossly overpriced.
If the property market was left to market forces of supply and demand that could never happen and we would have enterprise and beautiful buildings that suited all tastes and pockets.

A government now cannot even pull in enough taxes to pay the day to day cost of running their bloated, overpaid and over pensioned bureaucracy. There is no chance of them ever getting annual surpluses that would clear the massive losses. Most of those surplus buildings will never be occupied. They will remain as monumental reminders to the incompetence of the planners and developers and be an example to bankers worldwide on how not to invest.

The government will have to downsize their numbers radically and sell the family silver because they just don’t have the money to pay them all.
Coillte, the biggest land owner in the state and Bord na Mona could be disposed of. That would mean losing a lot of jobs for the boys. Sell the docks boards, fisheries and all the assets that this socialist government has taken into its ownership by confiscation and mismanaged down the years.
They could sell off the ESB and all the semi state bodies that make a buck like they did to Eircom. They probably will sell us the water also.
Our government screwed the country by planning failures and produced a massive herd of white elephants. Now Bacon is herding them into NAMA and when that is exposed for the sham it is they can blame him just as they blamed the banks for their own incompetence. It doesn’t matter if they value those elephants at half price or at the haircut price, they will remain white elephants and worthless unless we invite a few million foreigners into our green land to occupy them.
We are witnesses to the demise of what could have been a great republic.

federov says thanks for the answers. 'That is what I should expect to read in the papers but it wont happen - people are more interested in other stuff rather than hear the bad news. It is a pretty depressing picture but something had to give. This is a bit meandering but here goes:'

My reply. you should not think about leaving Ireland but rather recognise where we went wrong and rectify that and go forward.
This republic went off the rails when Charles Haughey and Dick Burke's father brought the planning laws on to the statute books in 1964. It put the planning of all buildings and any development, even putting up a humble sign or a tent in a field into the hands of the bureaucrats and effectively took so much freedom from the people in one stroke.
That law required the councils to divvy up the country especially cities and towns into zones where development could take place.
Needless to say if you were not a FF person your land would remain 'sterilised'. Zoned land made millionaires out of so many of these FF men. They were all waiting in the long agricultural grass for an oppertunity to get that coveted zoning as the cities and towns expanded and it led to much bribery and corruption of which we have seen only a small fraction.
This greed funnelled young families into town side and city suburban estates because even if you owned land you could not build on it and so the FFers had a captive market. When FG got into power they participated in the feast also and so we got to where we are today.

We struggled for hundreds of years to get the land and our freedom from the Brits and then when we got it, our own took it from us and we allowed it to happen by voting them in consistently. It became accepted that one must have permission for everything. It was a brainwashing process and sold in the interests of the common good, dont you know.
Prior to the planning laws any developer or builder was always wary of creating a white elephant, that is an unsaleable or unlettable building. He would have his research done before he built anything and risking his money and in almost all cases had a ready market waiting for him to finish. If he built poor quality apartments with no parking room it would be hard to let while the well built and upmarket ones would find ready buyers.

When that risk factor was replaced by the planning factor the ethos changed. Builders thought that if you got planning permission you were on the pig's back and guaranteed a sale and they built much poor quality homes that now flood the market.
Now it can be seen that the planners have created a huge herd of white elephants and we let it happen. The planners never matched the supply with the demand nor could they.
The architects and engineers never criticised the law because they were making money on every planning application. Likewise the lawyers who thrive on adversity.
The people whose lands were neutralised were the losers and the ones who had to shoulder a huge mortgage. We need planning laws but not a soviet style smothering bureaucracy of incompetant academics to plan our lives.

edw wrote ' Noel I think you personify the level of underestimation of the scale of the empties and the scale of the bust we're in.

Given that we built 90,000 dwellings in one year at the height of the bubble and that there are up to 300,000 empty dwellings and 70,000 unsold dwellings on Daft Noel I think that we can be safe to say that an attempt to manipulate the prices of the Market by buying 10,000 homes let alone 1000 homes is laughable. The misunderstanding about supply would be comic if it were not so common and also that it is in fact what underpins NAMA. When you add in the massive oversupply of retail space and commercial officce space the effect is truly shocking.

Our crazy levels of building were based on a single unchallenged figure of 40k dwellings per year as being the required number of houses for the Irish economy. This figure is generally accepted without question and is unfortunately the underpinning of NAMA and many other projected solutions to our problems and projections of how to get out.

I put the number of houses Ireland needs to build as being at 15000.
I base my number of 15000 as being the average number of homes built in scotland since the second world war. During that time scotland has had a steady population of just larger than Ireland.

I have had no one challenge this in any detail or explain why Ireland needs 40k per year when scotland has had only 15k.

If my assumption is correct the over supply will take way longer to clear.

20 years before we need another single replacement unit built......
So that's why I find your idea laughable.

 

My reply. Its apparent you have no experience in business because of your deductions.
What I proposed was a damage limitation solution to an unprecedented disaster that has befallen our ship of state, which like the Titanic is holed but not yet gone down and there is a chance to save it and limp to safety. Problem is our captain is a barrister and like yourself has no business brains. They are presently rearranging the deck chairs and lowering the life boats in an effort to save mainly themselves.

Extraordinary disasters require extraordinary solutions and I have provided one but it was ignored by the know nothings like you in government because they always look for precedents and legal advice and basically are quite incapable of thinking on their feet for themselves anyway being so wrapped up in their jobs.

Late 2008 I suggested the state covertly buy thousands of those properties that overhang the market at the fire sale prices of approx 100,000 under their 2007 prices.
If the state did that and skimmed about 10,000 units from the 70,000 on daft.ie, that would have turned the market around without a doubt. It would have cost about 150million euros only a tenth of the deposit they gave Anglo. It would also have put a floor on prices and NAMA would never have been needed. However the state would have had to put a stop to all new housing schemes for the forseeable future. Comparing Ireland to Scotland is not helpful because Scotland being under the crown, land is mostly owned by absentee English landlords while the people are huddled into flats and crammed estates around the towns. Irish people have a much greater level of freedom of choice, until now I hasten to add.

Now to take it a stage further if the state acquired even 100,000 units or a third of all vacant stock at 150,000 average that would cost 15billion, still only a fraction of the NAMA loss they are taking on board on behalf of us all. Needless to say to a business person, that could never be done practically but I think business people can see that such a policy would easily have underpinned the market and restored confidence and averted the disaster facing your children.

The government have chosen to shovel your borrowed money into a black hole and that much is gone there already with nothing in hand to show for it. My solution would have them holding either 10,000 or 100,000 new dwelling units on your behalf, a very solid investment and a market restored and capable of being restored to full health.

You suggest waiting 20 years to get back to square one and suggest housing levels we should aspire to. Forget it, as things go we are on the rocks just waiting to break up because the captain went into shock and is probably drunk. We might never get back to square one because our economy is just like a bag that was blown up steadily for a hundred years only to have burst because of a sudden massive over load. That excess will undermine all the existing stock of commercial and residential property and render it all greatly devalued until a new level playing field emerges.
Thats how Fianna Fail's many schemes or scams have distorted the market and the elephant in the room has still not been spoken about or even recognised.

2pack wrote

We already skimmed units out, they are quaintly called "affordable housing" and have nearly bankrupted our local authorities .

The affordable housing scam or scheme of Mr Dempsey I think was the main reason they changed the planning laws in 2000. It effectively meant that builders had to hand over one fifth of all houses in any development he got permission for to the local council at cost, who would offer them to the poorer of the nation at reduced or affordable prices. Effectively it meant that the other 80 per cent of the residents of an estate subsidised those owners who got the houses for far less money. The councils were becoming a soviet style local government. It was confiscation by another name in the drift to socialism and state planning.
Today they are stuck with them because a person can buy a house cheaper on the market than under the affordable scheme devised by the planners and the councils are stuck with them now.

2pack wrote 'clipping 10k houses out is nothing, there are 350k houses empty nationwide .

even demolishing 10k houses....is nothing

My reply .'If ten thousand units was bought up from the 70,000 on daft in a balanced and covert confidential operation spread nationally, that definitely would have lifted the market and brought out all the buyers who were waiting in the long grass for the country to collapse around them. It would have put a floor on house prices and its not in anybody's interest for the market to collapse.

The alternative was to shovel your money into that black hole and now all that money in the government pension fund is gone. They threw away the family silver.
At least if they had acted as advised they would have 10,000 houses to show for their money. Is that nothing?

Recognise that we might all end up on the floor very very soon. the party is over and hard times like the fifties are ahead for all so please be constructive. There are enough cowboys out there waiting and hoping that the whole country gets f...d up because they have nothing to lose.

FB2 wrote. 'the unholy trio that begat these problems remain largely untouched.

There is something fiercely wrong here."

 

My reply. Let me guess the unholy trio or as they would have it the holy trio of visionaries. Would it be Bertie for all his dealings with the grateful developers who paid him homage in his tent?
Would it be Dempsey for his extension of the planning laws to include affordable homes for the indigent who are now astute enough to buy in the open market?
And would it be George Redmond for demanding a fee for every permit he ever handed out over many years?

You have started a witch hunt.

 

boy racer wrote 'Once section 23 schemes are exhausted, there will be even more property dumped on the market as in many areas of the country there is no demand for these properties, outside of tax breaks.

Furthermore, there is no access to cheap credit, unless you are a bank dealing directly with the ECB, any money that would go into buying these houses would have to come from borrowing at higher interest rates, the taxpayer would end up paying the interest over a long period of time, so wiping out any possible gains from price fixing at a higher level.

Sometimes it is better to take a loss, write off the bad debts and liquidate the assets, the land can then be returned to farmland and the materials recycled in other houses or re-purposed for something else like landfill.'

 

My reply. I agree it wouldnt work now but it would have worked in the back end of 2008. It wont work now because the government have thrown all their money at the black hole in the banks and we are on a slippery slope to national bankruptcy. The ship is sinking and the captain is drunk as well as unfit for the job.
All their schemes have backfired on them. I agree that construction was never a sustainable proposition because once the house is built and occupied the job is finished. Unless of course you start scheming and you end up with NAMA to hide your white elephants.

Sustainable jobs come in factories and services by producing goods and services that other people need and want to pay for. Housing was always a short term solution to jobs and any first year student would know that but not it seems our political leaders.

 



Noel O'Gara on the Late Late Show with Pat Kenny.

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