If you ever need proof that the game in financial markets never really changes, you don’t have to look very far.
Just two days ago the Financial Times reported that some key Irish property developers are making a comeback.
The companies these guys ran collapsed alongside Ireland’s property bubble, which peaked in 2007. The cost to Irish taxpayers was billions of euros.
Michael O’Flynn is one of those developers. Five years ago, the ‘bad’ bank Nama took over 1.8 billion euros of debt attached to his property portfolio.
You’d think a loss like that would shut you out for the rest of your life.
Not so. O’Flynn just raised US$400 million in equity from US investors to build 10,000 homes over the next five years.
Ireland needs something to be done. The downturn in the country after 2007 was so savage it now has an acute housing shortage. That’s in places people want to live anyway.
Here’s what’s let O’Flynn back in. Guys like him have the network to access finance.
Money is hard to come by in this sector right now. Irish banks aren’t lending for property development.
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According to the FT, the banks lent only 424 million euros in the year ending to June. The country needs 6 billion euros to finance the 30,000 homes a year it needs.
This is probably the key quote of the article…
‘Irish housing construction used to be almost entirely debt-financed. In the boom years, banks loaned money to developers not just to build houses, but to buy the land on which they were built. Those days are over.’
This is how you know the Irish recovery is secure. It’s the wild expansion of credit that drives economies to their boom level peak.
That’s not happening presently.
In fact, Irish property still has a way to go just to get back to the level it was in 2007. But it’s heading in the right direction.
See for yourself…
Don’t miss the significance of this. It’s when house prices (really land prices) turn down that you really have to worry.
That’s not happening across the board in Ireland, the UK, the US or Australia right now (with a few exceptions depending on the country).
If you’re staying out of stocks or property and waiting around for the next 2008 downturn, you’ll be waiting for a long time, in my opinion.
Over at Cycles, Trends and Forecasts, we’ve said it all year…now’s the time to be building wealth and assets!
We even said it the day after the Aussie market took a nosedive. That was following on from the Dow Jones fall of 12% in one day in late August.
We said at the time…
‘The current cycle positioning, as it did in every cycle prior to this one, calls for the continued building of a long-term stock portfolio on market ‘panic’ days.
‘Yes, there will be more panic days. Build on your real estate portfolio as the cycle continues to turn. This week gives you the chance to do that.’
The market made a low at 4936 on 25 August.
Last Friday it closed at 5248.
Like we keep saying, you should be building up your wealth and cash flow.
Find out the best way to do that here.
Associate Editor, Cycles, Trends and Forecasts