Sunday Business Post-Property supplement*

Sunday, 29 March 2015

Page:
14

Circulation:
Area of Clip:
Page 1 of 2

34322
67600mm

New thinking is needed

to fund development

tive of the Institute of Professionaldemanding in their targets

necessary. Any means that
Auctioneers and Valuers aimed at generating lucrative
would improve funding for
who said: In the short-term I returns within a two to three
developers and supply of
believe [house] prices are falling year time frame. For those developers
housing would be welcome.
faster than the CSO figures
who are used to being The last thing needed now is
for supply to fall when demand
are suggesting.
their own bosses, this may
is increasing, he said.
The knock-on was also alludedrequire a complete change of
to by the ESRIsKieran
attitude in terms of accountability While supply has improved,
it is still low relative
McQuinn, when he said the
and tight deadlines.
to demand. Last Thursday the
Central Banks restrictions on
Then there are other developers
CSO revealed that developers
mortgage lending will probably
whose land is worth
got planning permission for
result in house prices being
less than their loans and who
3,530 new homes in multiunit
less, fewer houses being supplied have yet to sort out their debt
projects in 2014. Add in
and lower levels of credit
issues. For some of those, the
being extended than would
only way to get out of negative
one-off houses and this brings
otherwise be the case.
equity may be to add value to
the total permissions for new
But the credit restrictions on
the land by developing it.
homes to6,626. Butthatsonly
BY DONAL BUCKLEY
home buyers are not the only
CIF director general Tom
about a quarter of the 24,000
ones affecting supply. Banks
Parlon said recently: Whether homes that are needed to meet
^he2.9percent
apply even lower loan-to-value
we like it or not, the old system demand.
1fall in Dublin
ratios of 60 to 65 per cent on
of construction finance is
Commentators
suggest
house prices the amount of working capital dead. Most projects will need
the markets took a breather
' over the four
to make use of new [equity
for developers. Concerns
during the first two months
months since surrounding the remaining
and mezzanine partnership]
of the year and this lull is also
October has 35 per cent provoked the
models if they are to move forward.reflected in the development
added to the Department of Finance into
Over the last few years
land market.
debate
on supporting the Construction
access to finance has been one
Agents agree that there is
whether this price trend will Industry Federations latest
developer appetite for sites
of the key issues holding up
have a knock-on effect on campaign which is advising
but, as Wesley Rothwell of
construction activity.
prices for development land. builders to secure new sources
CBREexplained, the strength
Pat Davitt suggested another
While most agents say that of development finance in order approach in order to encourage
of
that appetite varies according
developer interest remains
to fund new supply.
developers to improve
to the level of supply
strong, at least one suggests
However, such alternative
supply of housing, and he
and activity in the local area.
that falling house prices are sources can prove more costly.
called on the government to
There is greater appetite in
also reducing site values.
While the pillar banks charge
establish a Builders Finance
those areas which have seen
Last year, anecdotal reports
suggested some Dublin land single digit interest rates on scheme. The government can less activity and supply.
Meanwhile, developers wait
values nearly doubled, but as their working capital, providersaccess the money markets at
of mezzanine finance
a very cheap rate right now, it to see what sites will be offered
such a pace of recovery could
should seize the opportunity
for sale later this year
not be sustainable, agents expect charge higher interest rates
and pass that good fortune on by portfolio owners, private
that land prices this year of 13 to 19 per cent. Another
group, equity investors, may to competent builders who
owners, banks and receivers.
may track house prices more
demand all of the profits from will bring supply to the market, Its almost like watching the
closely.
he said.
One agent said that if house the development and leave
judges on the RTE television
builders with just the fee that
Others point out that the
prices fall by 1 per cent then
show The Voice Of Ireland,
state, in the form of Nama, is and waiting to see whose chair
site prices could drop 2 or 3 per they charge for building a development.
already providing funding as will be the first to turn.
cent. On the other hand, Evan
For those developers who
reflected in building work on
Lonergan of Knight Frank said
developments such as Cosgraves
land values are stabilising and opt for a combination of mezzanine
and pillar funding,
Honey Park and Gerry
if, as forecasts suggest, house
prices rise by 5 to 10 per cent their blended interest charge Gannons Millers Glen.
nowadays could be around
But for those that are not
this year, then development
Nama clients, CIF housing
land prices could show similar 8 to 10 per cent per annum.
But the cost of funding is not
increases.
director Hubert Fitzpatrick
the only issue. Mezzanine and
Yet another view comes
said that the new models are
from Pat Davitt, chief execu equity funders can also prove

Planning
permission
received for
just a quarter
of the new
housing stock
needed to
meet demand

Circulation:
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Page 2 of 2

Sunday Business Post-Property supplement*

Sunday, 29 March 2015
Page:
14

34322
67600mm

BIMH0E
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Units grantee
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04 2014
10,375
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5 counties account for 50% Iall permissions granted

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