20th Aug 2008
Building out of the crisis
The Construction and Property Group which has been established to represent builders, developers, suppliers and those involved in the provision of professional services to the building industry is having a mass meeting in Cookstown tonight. Over 300 people are expected to attend.
The scale of the crisis facing our construction sector cannot be underestimated. 1500 jobs have already gone and there are rumours of many more. None of these record the many thousands of self employed trades people who are also out of work.
Also concerning is the debt owed to banks by the development community. The financial institutions backed the purchase of development land at very high prices over the past decade. The builders cannot now build out this land because the market has now fallen below the level at which it is financially possible to do so. This is why the banks and many in the development community are doing a lot of soul searching about how to get the market moving again. If this was an old fashioned western movie, we would be looking at the scene where everyone is pointing a loaded gun at each other. In simple terms the banks and the developers can be guaranteed mutually assured destruction if they don’t find a way out of this problem.
20,000 new houses are needed here every year. The big developers have already down millions. Many will spend the next decade trying to claw back the losses they have made in the past twelve months and some may go out of business. There is the possibility a bank may also hit the buffers.
But that is not the real issue.
If liquidity is not restored into the market and building restarts then the outlook for our regional economy is bleak.
Lets face it. The problem is that the buck stops nowhere because to lay the blame where it should be, i.e. with the banking community who funded the property bubble, would be what Lord Denning once described as ‘an appalling vista’. Lets get real, greed drove the property boom and now there will be 2 main categories of victim 1. young people paying crazy money and suffering negative equity 2. Developers who creamed huge profits off these young people for years and have now overstretched themselves. My sympathy is with the former, the latter can stew. The real villains of the peace, the banks, will sail on regardless as no government feels strong enough to move against them.