'Black Friday' looms as builders' market slows - Sindo

[verbatim]

‘Black Friday’ looms as builders’ market slows to a grinding halt

AIB has predicted that 10,000 jobs will be lost in the industry next year.

Now a survey carried out by Killian Jones and John Mattimoe of Merrion Stockbrokers gives a realistic assessment of the current situation.

Conducted in the last week in April, the 33 building firms surveyed were mostly long established operators who develop projects on their own landbanks. Three out of four builders expect their number of sales completions to drop in 2007 but what is surprising is the size of the decline predicted by many builders.

In all, 27 per cent expect a decline of between 0-10 per cent, while 21 per cent expect a fall of 10-20 per cent. Most worryingly a significant number, 27 per cent, predict a fall of greater than 20 per cent.

and of course

But if you thought this slowdown might bring much cheaper houses you would be wrong.

A strong majority of builders expect house prices to stay high - with builders cutting back on houses starts - which have already dropped fairly dramatically. Many feel they have the capacity to siton their landbanks and will not be under financial pressure to cut prices just to generate sales.

The bigger operators will simply sit tight and stop building new houses until the market is stabilised. That strongly suggests that some of the big builders who plan to cut the number of house completions rather than cut prices will look at their labour costs sooner rather than later.

independent.ie/national-news … 04171.html

[Gatelodge]

But if you thought this slowdown might bring much cheaper houses you would be wrong.

Yes I would be wrong as I expect this slowdown to bring cheaper houses, much, much, much cheaper in fact.
Rising interest rates,increased stress testing by lenders and the combination of the double whammy of job losses in both construction and manufacturing all at the same time will see to this and that’s before you even consider FF’s plan for stamp duty for FTBers.

The bigger operators will simply sit tight and stop building new houses until the market is stabilised.

Of course they’ll sit tight because they won’t have much choice to do otherwise and there’s no point in continuing to build houses that people won’t buy and they’ll just have to wait until the market stabilises at a much,much lower level.
I expect many builders to be taking a permanent holiday this july.

[miju]

this “tactic” of stopping new starts instead of reducing prices is what most of the builders are doing now.

problem is that this will only work for so long and the more prices drop in the 2nd hand market the bigger the gap meaning no-one will buy new builds if the gap is say 50k (which is very easily achievabke)

eventually the builder will have to concede defeat and sell at lower prices they make money from building not from sitting on unsold well over priced houses

of course if their tactic was to work it had other knock on effects for the rest of the economy which have been well discussed already so either way the prices of new builds will fall the builders are just gonna be stubborn about it

[Gatelodge]

this tactic of stopping new starts instead of reducing prices is what most of the builders are doing now.

I wouldn’t really call it a tactic as this situation is being forced on builders whether they like it or not.To continue building at previous levels would have only one outcome - financial ruin so as the EAs say it’s a “no brainer” really.
Some quarters are trying to make out that this is all tactics by the builders - it is not.
The choice is simple - stop building or go bust.There is such an over supply at the moment that reducing prices won’t solve it as the demand is simply not there anymore.The demand was never really there as it was all just a speculative bubble which has now vanished in a puff of smoke.

[verbatim]

The builders and developers will have loans to service too. Loans which will have been granted on the back of projected future cash flows, used to leverage up their business during the good times. They can talk about sitting on their assets for as long as they like but the bank needs paid, and in a liquidity crisis the assets will get sold at knock down prices.

[miju]

@Gatelodge

I wouldn’t really call it a tactic as this situation is being forced on builders whether they like it or not.

ooops i actually meant to stick a “” around tactic and what verbtim said as well

[Calina]

@Gatelodge

The bigger operators will simply sit tight and stop building new houses until the market is stabilised.

Of course they’ll sit tight because they won’t have much choice to do otherwise and there’s no point in continuing to build houses that people won’t buy and they’ll just have to wait until the market stabilises at a much,much lower level.
I expect many builders to be taking a permanent holiday this july.

actually, one of the key things that needs to be done here - and dammit I thought it was done - is that builders should be required to develop their landbanks within a specified time period of acquiring planning permission or lose the pp…wasn’t this one of the issues linked to the supply side problems five years ago?

if this was the case and then it became harder to reacquire pp due to a time lapse, then this would not be an option.

dammit, there goes the stable door and the second horse is long, long gone.

[plaudit]

Planning permission will also be a factor. If a builder buys land with planning permission today for say 80 houses he might not get it again in 5 years time when the original permission has run out. Of course some planning permissions will be out od date much sooner.

Another thing is the building regulations keep getting tighter - so every time there is a new planning application granted there will be more conditions, stone walls, extra insulation, radon pumps, wheelchair access etc. etc., many of which will not really add to the value of a house.

And what about half finished estates? If the builder stops midway then the residents will be onto him after paying through the nose for their home, this has not been an issue in the last 10 years as new houses were being churned very quickly.

[Thing_Fish]

“A strong majority of builders expect house prices to stay high”

wait until they copy that property company in Florida. or even, why rae they offering incentives such as paying the buyer’s mortgage for 6 months?

The property businesses are hoping for an economic upturn. I can’t see wages (already high compared with other countries due to our low corp tax rate) increasing, nor can I see how productivity is going to increase (as it did in the early 1990s)

If the construction industry does take a downturn, how many builders will be … EDIT - Thing Fish keep it clean much too crude. Please read the T&C thepropertypin.com/forum/viewforum.php?f=25 - Open Window