O'Reilly pressing ahead with massive Adamstown project

O’Reilly pressing ahead with massive Adamstown project - Emmet Oliver → independent.ie/business/iris … 83914.html

Could this be an attempt at increasing the value of the lands prior to Nama taking them over?
I recently saw a hoarding advertising a new development of flats in Bray, and wondered the same thing.

The valuation dates is based on value last October 31/November 1, subsequent planning applications, lettings etc make no difference

Property developer wants to build houses shocker

more empties
just what the Doctor ordered

Well, my old prediction based on what happened in the UK in the 1990s was that new house sales will reflect reality more quickly and will push the direction of the market (down, as it happens!). With labour and some materials now cheaper, the case to build in locations that have facilities is reasonable - there is a huge element of gamble to it, though, the main one being you are trying to predict where prices will be in 18 months time (i.e. that you can build at a lower cost that you will sell for). As we’ve noted here before, not all location/house types are oversupplied.

It is probably instructive to look at what was built in the 1970s following the bust then - 3/4 bed semis…

I was making the point elsewhere that many of these developers have borrowed heavily to buy the development land, and are facing repayments on that land! they simply can’t leave the land ‘fallow’ - how do they make loan repayments?

The question is when is a sunk cost, i.e. purchase of development land, a sunk cost?

What options are available to them?
Option 1 - sell the development land, its probably down 80% from price it was purchased at, but then you will fall way short of repayment amount.

Option 2 - assume that house prices have fallen by a smaller percentage than development land, therefore agree with your bank to fund your development to allow you to sell the houses near cost price which would help them sell quicker than other houses on the market, and then you should have enough money to pay off development costs and most of the cost of the original purchase of the development land

Option 3 - declare bankruptcy

or are there other obvious options that I’m overlooking?

the question I think we need to add is can O’Reilly afford NOT to press ahead with massive Adamstown project?

They’re all trying for option 2 which will actually worsen the over all losses for tax payers…

Option 3 is what we should be forcing every one of these muthaf£*&ers into.

You’ll have to back that up.

At the moment, the taxpayer is mostly exposed to development land and developments in progress. Negative equity isn’t an issue for the taxpayer except in so far as people are unable to afford their mortgage which isn’t going to change regardless of the level of prices.

This is a big gamble - if he can knock a 3 bed house out for 80/90K they might actually sell. Particularly if the estate is fully finished i.e. no wild ponies, street lights functional, construction fodder removed etc.

Exactly. And if they are on slightly bigger sites than normal (in recent past)? Well, Adamstown already has the schools… family housing seems to be what’s in demand.

I would suspect that there would be demand for decently priced family housing near the city, especially from those who are being forced to commute long distances from the middle of nowhere ghost estates. How they will pay for the houses is another matter.

I’m sure there is, but as you say, how would they afford it? They are largely screwed.

Demand from those who held out and either stayed renting or bought small would be my bet.

It will have to be family housing.

And who will provide the mortgages?

Nomura, Deutsche, ACCC… the last C being China…

If he can sell them for anything around the E100,000 mark he’d probably get quite a few takers. There’d be enough people with deposits in the E50K+ realm, that even with a massive mortgage clampdown, they’d get the rest somewhere.

3 beds in that area seem to rent for E1000pcm, say that falls another 20% over the next five years, you’re still talking E800pcm.
Rent them unfurnished on long leases, give tenants the right to make changes, run a decent management/repairs system using your own contractors, you’d get takers.

You don’t even have to go far as the UK for evidence of that.

My parents bought their current home back in the 80’s in a ghost estate in Cork that was being completed by a developer that bought the site from bankruptcy. Neighbours who had bought from the original developers were fuming for a long time, because they had bought previously at higher prices. I remember it all well because HouseBuyer was distinctively unimpressed by the fact that diggers were dredging up the green area where he could have played football.

No shortage of cash in the world to invest in good risks.

Maybe so, but these foreign mortgage lenders are not currently operating in the Irish market, will they be here within 18 months?