Return to property speculation to tackle economic crisis is a cause for concern
It sounded unbelievable this week to hear NAMA announce at a business breakfast in Galway that it is to invest €2 billion in construction projects, which, according to reports, will go towards completing unfinished shells of buildings primarily in cities around the country, to bring them up to standard suitable for selling on to buyers.
Such prospective buyers are in turn expected to borrow the necessary money from the banks to purchase these properties — at a time when access to credit from banks has never been tighter — and coming just prior to the anticipated publication of the insolvency bill, which is expected to compel banks to endure serious debt write-offs.
Naturally the story has sent alarm bells ringing with questions now being asked whether the aspirations behind this strategy are at all achievable. Putting aside the promise of up to 35,000 jobs being created in the starved construction sector and the lofty ambition of NAMA chief Frank Daly to get the property market moving on the home front once more, surely what this decision lays bare is the sheer lack of new thinking that persists regarding identifying solutions to the economic crisis.
Anyone who knows anything about property in Ireland knows that home ownership goes beyond cult status with over 80 per cent of us claiming a proprietorial stake over the four walls we call home. While this trend is partially to blame for the current financial mess many of us are wading in, the real liability lies with the banks and financial institutions that threw all caution to the wind by offering mortgages far beyond the means of regular workers, in some cases up to 100 per cent the value of the property.
To discover now that our National Assets Management Agency — offered in courtship to us as a knight in shining armour that would round up all our bad assets in return for some profitable rescue payoff — has come back after three years offering more of the same —is utterly uninspiring, to say the very least. This new ploy to pay wages for new-to-be created jobs with no guaranteed promise of a return, is not only uninventive and frightening, but is also offensive. Have we not learned our lesson about construction and property? Should it be cause for celebration that the construction sector, which was worth a reported €36 billion to the economy during the boom years but now just amounts to €9 billion, is to enjoy this unexpected injection of funds primarily for the purpose of regenerating construction jobs?
Naturally the news was received with caution by those in and outside the construction sector with reference made to an actual housing shortage in Dublin and other cities such as Limerick, Cork, and Galway, due to more of the population veering towards cities where the jobs are, while a requirement for top standard commercial properties suitable for multinationals and IDA clients has also been highlighted.
It is not denied that part of NAMA’s remit was to take €30 billion of Irish property debt with a view to selling it on as profitably as possible, and also to raise finance in the process. This latest move to upgrade properties requiring completion to prevent them becoming obsolete like the many rural ghost estates is also a worthy aspiration. However, it is worth pointing out that NAMA money is our money, funded by Irish tax-payers. Playing around with our meagre savings in — of all things — property speculation once more, at a time when there are no real signs of an improvement in the property market, does not somehow seem quite so worthy.