DEVELOPMENT LAND:The general feeling among agents is that transaction volume for development land is down by as much as 80 and 90 per cent on 2007, writes Fiona Tyrrell.
AFTER FOUR years of runaway growth and headline-grabbing prices the development site steam train came off the rails in 2008 and had its worst year in a decade.
With virtually no deals being done in the second half of the year and a collapse in demand, getting a handle on where values are at is a tricky business.
One developer, who didn't want to be named, said site values are an "issue no one wants to talk about. No one wants to do values because they will make the banks even more jittery than they already are. Everyone is sitting tight hoping for the market to come around."
The year of 2008 was when lack of finance "wreaked havoc" on the sector, says Stephen Cassidy of Savills. This, combined with heavy-duty negative sentiment, means that no deals were done after April making it very difficult to say where values are at, he says.
However, most commentators agree that good sites in Dublin are down by between 30 and 50 per cent compared to mid 2007.
Some land that changed hands for over €40 million an acre on the south quays of Dublin's docklands in early 2006 is probably down to €20-€25 million an acre, according to one Dublin agent. Elsewhere the picture is gloomier. Provincial land values are down by up to 60-70 per cent, says Garvan Walsh of Kelly Walsh.
It is very difficult to sell land outside the 40-mile radius around Dublin and some sites, even those with zoning for development, have reverted to agricultural values because they will be "undevelopable" for 10 to 15 years, according to another agent.
After a bruising year in 2007 when development land values were back by 25 per cent on 2006 and demand was down by around 60 per cent, there were no great expectations for 2008. Developers were already pulling back from purchasing development sites early in 2008 and then the world financial crisis hit, extinguishing any appetite for sites.
The number of notable deals done in the early part of the year can be counted on one hand. Spain Courtney Doyle achieved €36 million for the Esmonde Motors site of 0.607 hectares (1.5 acres) at the Stillorgan Road in Stillorgan, Co Dublin, over the Christmas/New Year period.
At the end of March Hooke MacDonald sold 5.7 acres at the Mount Argus monastery in Harold's Cross for €20 million to developer Eugene Larkin of Twinlite Construction.
In reality the sector "hit the wall" in April and very few deals were made in the following seven months. Bucking the trend was Ben Dunne who agreed a deal of over €5 million last month with the Presentation Brothers to buy their former playing fields in Glasthule, Co Dublin - a site of 4.3 acres where he intends to build a fitness centre. Eighteen months ago that site could have commanded 50 per cent more. Bannon Commercial was the selling agent.
The year of 2008 was a time when deals were either not done or when many of those that were done became undone, says Liam Stones of Bannon Commercial.
The general feeling among agents is that transaction volume is down as much as 80 and 90 per cent on 2007. "You wouldn't even sell raffle tickets for sites at the moment," one agent lamented.
Getting property deals across the line back in 2006 took a matter of two to six months. In 2008 it took anything from nine to 12 months and lots of work had to be done to ensure no one walked away from the deal.
Another feature of the year was new planning guidelines introduced in Dublin city. Overshadowed by the credit crunch, these restrictions have shaved 20 per cent off land without planning permission, says Des Quinn of Hooke MacDonald.
All commentators agree that the banks hold the key to recovery. When finance does become more readily available, banks will be much more "picky", they say, and will only talk to strong well-established builders, possibly only lending 50 per cent of the value. The day of the syndicate and investor are gone.
With a growing number of developers sitting on partially developed or undeveloped sites, the big questions are, how are they going to make them work and will the banks pull the plug?
"There are builders in negative equity on sites. They borrowed more than they can dream of earning back on sites. Some are paying interest on the sites and some simply are not," says one agent.
Looking forward to 2009, Walsh predicts that good sites in Dublin will be developed as joint ventures between banks and developers. Pulling the plug is not an option, because there is no one else out there to buy the sites. Banks will do joint ventures with stronger builders and take the sites off weaker ones and do deals with a developer who is in a position to service the debt, he says.
A more restrictive lending and a more conservative approach from developers will mean land values will come back substantially, says Ronan Webster of CBRE. Citing examples, such as that of Candy Candy handing back the keys on the £200 million Middlesex Hospital site in London it had planned to develop into luxury apartments, Webster says that Ireland's woes are part of a worldwide trend.
"The only perverse comfort we have waking up in the morning is knowing that this predicament is not an Irish problem, it is a worldwide one. The good news for Dublin at least is that its overhang is not as bad as that of other cities in Europe."
