A DALKEY house valued three years ago at €6.25 million has been sold for €1.4 million.
Fairlawn House on Saval Park Road in Dublin stands on an acre of grounds and was expected to sell as both a trophy home and a potential site for housing when it came on the market in May 2007.
Estate agents Lisney described it as “offering immense potential for further development subject to planning permission”.
The guide price did not seem mad at the time – a nearby house with a far smaller garden had sold for over €5.5 million.
However, Fairlawn failed to sell at auction in June 2007 and has been for sale ever since, through different agents, its price sliding in line with the collapsing property market.
In 2008 the price dropped to €5 million; by 2009 it was available at €3.4 million; and by September last year Fairlawn was down to €1.75 million.
It has finally been sold at €1.4 million to a couple who live locally.
The recent cut in stamp duty from 9 per cent to 1 per cent will mean a substantial saving for the new owners.
Fairlawn is an Edwardian five-bedroom house with lots of living space and more than enough room to extend into the garden, subject, of course, to planning permission.
The property is screened by immense trees and has very extensive road frontage which would obviously enhance its chances of getting planning permission if required down the line.
The house is listed, which might have put off developers over the last three years, but it is likely that the new owners will investigate its potential in the years to come.
The slide in house prices has been more pronounced at the top end of the market, where prices rose spectacularly during boom years.
Most are down by at least 50 per cent and even then they are proving difficult to sell.
In the same month that Fairlawn went up for sale in May 2007, a large redbrick at 43 Ailesbury Road was sold at about €8.5 million.
It was bought by financier Derek Quinlan, who last week put it back on the market asking for €2.95 million.
Monday, January 31, 2011
By Treacy Hogan Environment Correspondent
Monday January 31 2011
THE number of new houses built last year plummeted to the lowest level in 35 years as prices continue to fall.
And there is no sign of the property market bottoming out with demand for new homes continuing to fall.
The full extent of the property slump is revealed in an official report obtained by the Irish Independent.
It shows that just 14,602 houses were built last year.
This is the lowest number since well before 1975, when 26,788 houses were built.
Some 93,419 houses were built in 2006; 78,027 in 2007; 51,724 in 2008; and 26,420 in 2009.
The figures, from a Department of the Environment report on house construction over the past 40 years, confirm the price collapse is continuing.
"The market is still in freefall. And it has not yet bottomed out," a government source said.
"Unless prices stabilise and people start demanding more houses it looks like there is more to go in terms of the price drop."
Construction activity and employment levels may finally start to bottom out this year, according to an independent economic assessment commissioned by the Government and undertaken by DKM.
The number of workers employed in construction fell from 272,600 in 2007 to 121,00 last year. At the same time, construction tender prices fell by as much as 35pc in some sectors.
There are 33,225 empty units in 2,846 ghost estates, and the Government has taken out long-term leases on 2,500 units for social housing.
- Treacy Hogan Environment Correspondent
CONOR POPE, Consumer Affairs Correspondent
A BROKEN banking system is having a “crippling” effect on the property market and house prices are continuing their downward spiral, although the pace of decline has eased slightly, according to a survey published yesterday.
The report, by the Irish Auctioneers and Valuers Institute (IAVI) and the Society of Chartered Surveyors (SCS), said a lack of availability of mortgage finance for qualified buyers was hampering recovery except in “micro-property markets” where the effects of the bursting bubble were starting to ease.
“We can no longer rely on average national house price figures, as property values are largely dependent on property type and location,” said IAVI acting chief executive Edward Carey.
The institute received about 1,400 responses from its members to the survey and said signs of “micro-property markets” had started to emerge.
Mr Carey said where the basic fundamentals of location, quality stock, schools, job opportunities and transport were good, activity was “relatively strong” last year. As a result, the pace of decline “has moderated significantly”.
Areas which are lacking these fundamentals are suffering even more.
In Dublin, the average price of a second-hand three bedroom house fell by 14.3 per cent last year, compared to a drop of 18.8 per cent in 2009.
In Leinster, house values fell 17.1 per cent in 2010 compared with a decline of 19.8 per cent the previous year. In Munster, the drop was 15.2 per cent, a decline of 2.7 per cent less than 2009. In Connacht and Donegal, values were down about 15.7 compared with 16.3 per cent in 2009.
Mr Carey said the absence of a “fully functioning banking system” was hampering growth in the sector. “Despite Nama having acquired several tranches of loans from financial institutions,” Mr Carey added, “the survey results suggest that the availability of mortgage finance to qualified buyers has not improved in 2010 and this is having a crippling effect on the property market.”
Yesterday’s survey paints an even bleaker picture of the housing market than the house price index from Permanent TSB and the Economic and Social Research Institute (ESRI), which was published earlier this month. That reported that house prices fell by 10.8 per cent in 2010 compared to a drop of 18.5 per cent in 2009.
The Permanent TSB/ESRI index showed prices in Dublin fell by 15.1 per cent for the year as a whole, while prices outside Dublin were down by 8.1 per cent for the year as a whole.
The average price for a house outside the capital was €174,570 in the final quarter of the year, as against €179,721 three months earlier.
Mr Carey also called for greater regulation of the property sector “to provide consumers with a level of confidence and redress”.
He claimed that a national property price register was “crucial to provide transparency and openness through the publication of actual sales prices for residential and commercial properties, which is readily available in the UK and internationally”.
The house of the rising costs
30 January 2011Mortgages, legal fees, stamp duty - buying a house can be a financial maze.
Throw in hundreds (or even thousands) of euro for fixtures and fittings, and it’s no wonder that buying property is considered one of the most significant financial decisions most of us will ever make.
But - after you’ve crossed the t’s and dotted the i’s, packed up your boxes and are all set to go - don’t forget the hidden costs of moving house.
The logistics of moving from one home to another - whether you are a renter or a buyer - will tap your wallet in ways that you might not have considered.
First past the post
So you’ve shown your friends and family your new home, but have you remembered to inform all your service providers of your decision to head for pastures new? Irish website NewAddress.ie - formerly MyAddress.ie - offers consumers a free service to take the hassle out of moving.
The company will liaise with banks, electricity firms, television companies and all manner of other service providers to change your address details. NewAddress.ie deals with upwards of 80 firms on behalf of customers.
The company used to charge a €10 fee, but have waived this for their relaunch. If you opt instead to contact all the companies you deal with to update your details, make sure to allow ample time.
If you are worried that you might miss important letters by moving house, An Post offers a postal redirection service for anyone changing their home or business address.
‘‘For a change of address, it is priced from €55 for three months, €75 for six months and €110 for 12 months," said An Post’s spokeswoman.
‘‘For security reasons, you must bring ID with the application form before availing of this service."
Electricity and gas
When you move to a new home, make sure to contact your gas or electricity provider in plenty of time.
‘‘If customers are moving home, They must give 28 days’ notice, either by writing to us or by calling our customer service team on 1850632632," said a spokesman for Bord Gáis.
He added that the company would then arrange a final meter reading and forward the final bill to the customer’s new address.
‘‘If the customer cannot provide us with the name of the incoming customer, we will need access to lock the meter," said the spokesman.
‘‘The customer remains liable for energy consumed at the premises until we receive the account cancellation notice, details of the incoming customer, or access to the premises to lock the meter."
Similarly, ESB requests that customers who are moving provide their name and account number, moving date, final meter reading, forwarding address and the new occupant’s name and phone number.
‘‘If these details are not provided, electricity will be disconnected and you will be charged the disconnection fee," the company’s website explains . ‘‘We try to avoid disconnecting the electricity supply when there is a simple change of occupancy."
When you move to a new home, the same process applies, to allow you to take responsibility for the electricity supply in your new home.
However, if you are moving into your first home and have never had an electricity bill in your name before, you may face an additional fee.
‘‘All new customers or those who have not held an account within the past two years must either sign up for direct debit payments or pay a security deposit of €300," according to ESB.
Bord Gáis operates a similar policy.
‘‘When you call to set up your new account, you will be registered and will then have 14 days to sign up for direct debit or pay the security deposit," said the spokesman.
‘‘Where the customer does not have a previous history or relationship with Bord Gáis Energy, we may insist on a deposit of between €200 and €400 for new accounts.
This is based on the length of occupancy, ownership of the property and if the customer is paying by direct debit or not."
Airtricity advises customers that are moving house to contact them to ensure that they are not billed for any electricity or gas consumed at their old address after they move out.
To close your Airtricity account or to settle your bill at your old address and move your account elsewhere, Airtricity requires the customer’s account number, a final meter read and a forwarding address.
If you wish to sign up to Airtricity’s service at your new home and are a new customer, you face a security deposit of €300.You can avoid this if you pay your bills by direct debit. ‘‘Customers also benefit from cheaper unit rates by choosing to pay by direct debit," Airtricity’s spokesman said.
Renters face a different situation than homeowners. ‘‘Tenants are required to pay a security deposit of 200 if paying by direct debit and a 300 deposit if they do not opt for direct debit bill payment," the spokesman said.
‘‘If the customer is a homeowner, they can request a refund of a security deposit after 12 months, provided they have satisfied our payment terms on a continuous basis. If the customer is a tenant, the security deposit will be repaid when the customer closes the account, provided the full account balance has been paid."
Home phone, television and internet contracts tend to require customers to sign up for a minimum period. If you break this contract, you may face additional charges, unless you can transfer the customer account to your new address.
UPC said that it required at least 14 days’ notice to transfer an existing account to a new address. ‘‘Customers who select UPC as their preferred provider at their new address simply transfer their account number," said a spokeswoman.
However, if you decide to discontinue your UPC service within the first 12 months of your contract, a cancellation fee will apply. ‘‘This may be as much as €200 or the balance of the contract period owed, whichever is the lesser," the UPC spokeswoman said.
Once the 12-month period has passed, customers who want to terminate their service must provide a forwarding address and pay any outstanding bills. ‘‘If a customer moves to an area where there is no service or they simply move to an alternative provider, we require 30 days’ notice and full payment to the end of the 30 days’ notice," said a spokeswoman.
With Sky, if a customer is moving house and wants to remain a Sky customer, the company will transfer the existing service to the new home at no cost. However, if you want to discontinue your service, you will be charged for the remainder of the minimum 12-month term at the rate of Sky’s cheapest available option.
If you move to a new home and want to avail of Sky’s service for the first time, there is an initial set-up fee of €30.Aside from providers, having a television service also means an additional charge for your television licence.
At an annual rate of €160, television licences are too expensive to discard when you move home, but you can transfer your television licence to your new address. ‘‘Your television licence moves with you, but you must inform An Post’s TV licence team of your new address details so that they can update their records.
Your automatic renewal notice will then be sent to your new address at whatever stage it is due."
Your home phone is another consideration when moving house. Eircom allows customers to transfer their phone line to their new house, if they provide a phone number and customer account number, contact phone numbers, the address of the new property and the date they are moving.
For customers who have a telephone line in their home and are moving to a house which previously had a working telephone line, the connection is free.
However, if the house they are moving into has never had a land line, or line work needs to be completed, Eircom will charge a connection fee of €121.93. A promotion offers free connection for new and already in-place lines until June 7.
If a customer is moving to a house with a working line and the resident agrees to transfer this number to the new owner, a fee of €12.10 will apply.
‘‘If a customer has signed a contract for either six months in the case of a land line or 12 months for both land line and broadband, early cease charges would apply if the customer cancels the contract, but of course there are exceptions," Eircom’s spokeswoman said.
‘‘However, if the customer is transferring exactly the same services as they had before to their new address, there are no cancellation fees."
Moving home could also affect the insurance premiums that you pay for home and motor cover.
‘‘For example, if you are moving from a rural area to Dublin, you should expect to pay a higher premium for home insurance," said Michael Horan, non-life manager at the Irish Insurance Federation.
‘‘Rebuild costs are higher in Dublin, so the sum insured would be higher, which would obviously have an upward effect on premium."
Another reason your home insurance premium may change when you move would be the risk of theft at your new home.
‘‘If there were an increased theft risk, then your contents cover would be more expensive," Horan said. ‘‘For household cover, geographical area is a rating factor, especially for contents cover."
Your car insurance premium could also change. ‘‘The main rating factors for car insurance are age, gender, claims history, driving experience and what you use the car for," Horan said.
‘‘Geography is also a factor. For example, if you will be parking your vehicle in an area with a higher theft risk, or driving it in an area with a higher frequency of claims, you could see a rise."
Does your home have a driveway or parking spot that allows you to park for free? Moving to a property with on-street parking may result in an additional expense.
Typically, houses in urban areas that have parking outside require residents to apply for a resident’s parking permit from the local authority. For Dublin City Council, there’s a fee of €40 for one year - or €70 applies if you pay for two years at once. Galway City Council charges €20 annually for residents’ parking permits, while Cork City Council charges €10 annually.
Where you live determines how much you pay to dispose of household waste. For example, if you rent an apartment, your landlord most likely pays management fees, so you have access to free waste disposal at your apartment complex. If you own an apartment, your management fees typically cover your waste bill.
People living in houses are charged for waste disposal in a variety of ways, whether by the local authority or a private waste collector.
Some areas levy a fixed annual charge plus a ‘‘per bin lift’’ fee. Others operate a pay-by-weight service, while some charge an annual standing charge plus an additional charge per kilo of waste.
Insurance premiums on the rise following bad weather
30 January 2011 By Emma KennedyHome insurance premiums look set to rise by up to 15 per cent, as insurers deal with a flurry of claims after the recent Arctic conditions.
Claims for damage caused by the bad weather will push premiums up by 10-15 per cent, according to the Irish Brokers Association (IBA).
‘‘We anticipate significant price increases from individual insurers, though this will vary considerably as each underwriter takes a different view," said Brian McNelis, director of general services with the IBA.
He said there was already substantial variation in premiums across the home insurance market, and that the terms and conditions on each policy could also vary hugely.
‘‘It will pay to shop around or get a professional to do it for you," he said. ‘‘It’s important to trawl the market to ensure you get the best price with the lowest excess and the least exclusions."
McNelis said that cover would become increasingly restrictive in 2011. ‘‘Policy covers will be restricted for some people following recent water, flood and snow damage claims. In some instances certain benefits will be excluded."
The IBA also predicted that excesses would increase, meaning consumers would be liable for a larger proportion of the overall claim. According to the IBA, so me insurers will increase excesses from current average levels of about €150 to €500 to €1,000.More policy exclusions are also on the way.
‘‘It seems that some providers are intent on applying other exclusions to policies depending on location and other factors."
This was well-flagged, but I think people will be surprised at how much premiums will increase.
Monday, January 24, 2011
With no national house price register available to help homeowners, working out how much your property is really worth can be tricky – if not impossible
LIKE MANY neighbourhoods around the country, Charlesland in Greystones, Co Wicklow could be renamed Walter Mittyland, such is the huge disparity in the asking prices of houses in the area.
When Keith Slowey and his wife, Genevieve, put their three- bed end-of-terrace on 89 Charlesland Grove on the market in October at an initial asking price of €310,000 (now reduced to €295,000), a three-bed mid-terrace house nearby was asking €345,000 while another three-bed, also mid terrace, in the area was €485,000.
There are lots of properties in Charlesland on the market and according to Keith Slowey, “the price range is crazy”. Two-bed houses predominate in the estate and some are asking more than nearby three-beds.
The houses are being sold by investors bailing out of the market and owner-occupiers looking to migrate down the N11 towards south county Dublin where properties are now more affordable.
The Sloweys are looking at five-bed houses in Delgany that cost €1.2 million at the peak but are now just over €500,000.
Before deciding what to ask for his house, Keith studied similar houses in the area on myhome.ie which he says was helpful, but a little misleading.
“All you are seeing is the prices people are looking for, not what they are actually getting.” With no house price register and a lack of transparency surrounding selling prices due to data protection legislation, confusion and denial reigns.
Some vendors are clinging to the vain hope that someone will love their property enough to meet their asking price, even it’s substantially more than their neighbours are asking for a similar property.
Charlesland was built in several phases and the asking prices in some cases reflect the prices originally paid. While the Sloweys bought their house in 2005 in an early phase of the development for €385,000 and will make a substantial loss of around €90,000 if they sell at the current asking price, they have good savings which will make up the loss.
“Some people who bought in later phases paid €525,000 for the same house and probably can’t afford to drop below a certain asking price.”
Little did vendors and estate agents know when properties were flying out the door at the peak of the boom that life was about to get so complicated. Now, with far fewer transactions to facilitate comparisons and no national house price register available to help homeowners assess the value of their own property, working out how much a house is worth can be like nailing jelly to a wall.
While the Government has promised to establish a national property price data base, this is unlikely to be set up in the short term. It’s dependent on the fate of the Property Services (Regulation) Bill 2009, which came before the Dáil in November but looks increasingly unlikely to be passed before an election is called.
For now, house prices remain a private affair between the buyer and the seller and their agents, the exception being prices achieved at public auctions. However, with so few of those happening, auctions can no longer be relied on to provide an accurate picture of values in any given area.
One of the problems is that while we know prices have taken a nosedive since the peak, the exact amount by which they have fallen is up for debate. The latest Permanent TSB/ ESRI house price index says house prices fell nationally by a further 3.5 per cent in the last three months of 2010, putting the fall since the peak in 2006 at 38 per cent.
But different house price indices tend to come up with different figures and often don’t take into account the nuances of local markets.
Low transaction levels – the country largest estate agency chain, Sherry FitzGerald estimates says the number of homes it sold last year, was down 55-60 per cent from the peak year of 2006 – have meant that it’s difficult even for estate agents to get a handle on values in some areas and even when they can glean some prices from other agents, sellers expectations and personal circumstances also come into play.
Against this backdrop of low activity, agents also find themselves having to appeal to sellers to be realistic about price, says Gunne director Declan Cassidy, who operates from the agency’s Fairview branch.
“You can show them (the sellers) asking prices for similar properties in the area, and they might say they want to be realistic, but if another agent says they’ll get them a higher price, they often go with them. A few months later and it’s back down in price.
“It’s all about getting them to believe the facts. For instance, if they know their neighbour sold at €325,000, why do they think their house is going to get €375,000? If they price it right in the first place, the get viewings, and once viewings start there’s more chance of getting bids.”
Vendors tend to be more realistic when they need to sell quickly but not everyone is in a hurry to sell. Estate agent Owen Reilly who specialises in docklands property, says that some owners are happy to leave their property on the market, at an unrealistic price, for months, even years. “This is creating a false impression of the market, that nothing is moving.” he said.
Some vendors may well be just testing the market, while others are putting property up for sale as an exercise to appease their bank, but at a price at which they know is unlikely to attract bids.
In some cases where properties sell after a long period of being on the market, the neighbours can be shocked to discover the eventual price, which may be far below the asking price, and far below what they reckon their own home is worth. These slow-to-sell properties often undergo gradual under-the-radar price drops and eventually sell at a fraction of the start-off price.
Price is the first thing most buyers notice. Sellers can be reluctant to commit to an asking price they feel doesn’t reflect the special features or standard of their property, but the anecdotal evidence is that they won’t get viewings unless they are prepared to compromise. While the size, condition, orientation and parking all have a bearing on what is being asked, ultimately says Reilly, it’s a numbers game. “It’s all about encouraging viewing and activity.”
Agents are saying that while there’s a perception that nothing is selling, when a buyer feels there is value they act quickly.
Declan Cassidy subscribes to the theory that selling houses is about getting people to viewings. “If a number of people turn up to view a house, it’s a comfort to each one to know that they’re not the last buyers out there.”
It’s easier to value property at the lower end of the market, where activity is stronger. “People will see a ‘sale agreed’ sign around the corner, and will phone us and ask us to come out and do a valuation on their house.” says Declan Cassidy. It gets trickier in areas where there haven’t been many recent transactions or where there are one-off properties, often in upmarket areas. “If you are going into an area you are not familiar with, there’s a good chance you will get it wrong unless you do your homework,” he says.
James Barber, who is selling a three-bed apartment at 125 Longboat Quay on Grand Canal Dock, says while his apartment is bigger than average – and is spread over two levels with some lovely features including swish bathrooms with underfloor heating – he came to the conclusion that he couldn’t assume that buyers were paying attention to the finer details. He accepted the estate agent’s advice to set an asking price that would generate viewings. “I did my own research as well and looked at Daft and myhome.ie, comparing my apartment with others.” His apartment is unusually spacious, with all mod-cons, but doesn’t have parking or a view of the dock and is on the ground floor. While he is asking €390,000, another much smaller 81sq m (872sq ft) two-bed on Longboat Quay but with waterfront views and parking is asking €495,000.
Barber has had over 30 viewings, by a mix of Irish people, Zimbabweans, South Africans, Chinese and Polish people, “but only two or three silly offers”. Barber’s agent, Owen Reilly, says: “If you were just talking about price per square foot the asking price should be higher but you have to put yourself in the buyers shoes and take into account that there is no parking”.
So how do agents value property in areas where they’ve had few transactions? They are saying that while the lack of price transparency makes life difficult, there’s more co-operation now between estate agents, who are helping each other with price comparisons .
“They won’t give you the exact asking price but you probably get fairly good idea,” said one director of an estate agency chain with several branches in Dublin. Big estate agent firms can have an advantage because there are more transactions which can be used for the purposes of comparison.
But even for the bigger agencies it can be difficult to get a direct or similar comparison, particularly where a property is unusual or has a quirk, and in the past these would have gone down the auction route to find their value in the marketplace. Declan Cassidy says agents can build a picture of values by talking to people – even people on their list who haven’t bought from them but who will often disclose how much they paid for another property.
However, even the most savvy agent can find themselves have to re-evaluate rapidly. This has been happening in neighbourhoods where receivers have been called in to dispose of distressed properties. A recent case was the sell-off of a block of apartments on the southside, called Booterstown Wood, at prices that were less than half those originally asked by the developer. “Overnight it established a new value for that kind of property and in line with that I had to adjust the price of a property I had for sale nearby.”While big receiver sales can force people to re-evaluate asking prices in an area, individual vendors who drop the price of their home to a new low level can come in for stick from their neighbours.
Keith Slowey says he was approached by another seller in Charlesland who said his strategy to undercut the market, was “dragging everyone else down. But the way I look at it, it’s all about who can afford to sell and get out quickest”.
SIMON CARSWELL, Finance Correspondent
CORK PROPERTY developer Michael O’Flynn has written to the Public Accounts Committee and the National Asset Management Agency rejecting comments made by its chief executive last week that the top 10 borrowers have personal guarantees on their loans.
Brendan McDonagh, chief executive of Nama, repeated previous comments at the committee’s hearing last week that each borrower in the first tranche transferred to the agency had offered some form of personal guarantee.
Mr O’Flynn, chairman and managing director of the O’Flynn Group, wrote to the committee last Friday confirming his group was one of the first 10 borrowers whose loans were transferred to Nama in tranche one.
However, he denied in his letter to the committee’s chairman, Fine Gael TD Bernard Allen, that personal guarantee were given on the bank loans of the group.
“It has also been published in the print and broadcast media on a number of occasions that the bank loans of the O’Flynn Group are not in any way supported by personal guarantees,” Mr O’Flynn wrote.
“I want to confirm to the committee that this is the correct position.
“I would be obliged if you to bring this matter to the attention of the committee so that the record can be clarified.”
He concluded that he had also written to Mr McDonagh on the matter.
Mr Allen said he had written to Mr McDonagh to see if he wished to respond to Mr O’Flynn and, if necessary, to correct the record on his comments on the guarantees.
A spokesman for Nama said it never disclosed the names of any of the borrowers or companies it engages with and declined to discuss specific cases yesterday.
“Nevertheless, Mr McDonagh chose his words carefully when addressing the committee on this issue and he stands over those comments now,” the spokesman said.
“If the committee writes to Mr McDonagh on the matter, then he will, of course, engage with them on the matter insofar as he can.”
Many developers agreed to provide personal guarantees as security to their banks to secure loans. The practice was common at Anglo Irish Bank, a significant lender to Mr O’Flynn’s group, though he has consistently maintained he has no such guarantees.
Nama acquired loans from the banks with personal guarantees, but assigned no value to them when determining the discount it applied on the purchase of the loans.
Personal guarantees have led to multimillion euro judgments being secured by the banks against property developers in the courts.
A MAJORITY of 550 north Dublin homeowners suing over damage to their houses have accepted the creation of a €25.5 million trust fund to carry out repairs to the affected properties.
The Commercial Court was told yesterday that of the 550 householders, 498 or 90.5 per cent had agreed to the formation of the fund; 33 opposed it and 19 did not indicate a preference.
The formation of the trust fund depended on the agreement of 85 per cent of householders.
Brian O’Moore, for Menolly Homes, said the result “represented a powerful level of acceptance of the scheme by the homeowners concerned”.
Those votes must translate into formal acceptances on or before February 11th, after which the establishment of the trust fund could be put in place.
“It’s not the end of the case. It is, we believe, the beginning of the end of the case,” Mr O’Moore said.
Mr Justice Paul Gilligan said he proposed to accede to the request for the acceptance of the fund and marked the case for mention on February 15th. After this date, the fund can be established and the court can dispose final orders in the case, one of the longest in Irish courts history.
Affected residents had mixed reactions following the hearing. While some felt that the offer was as good as they were likely to get, others expressed anger at the outcome.
“I am gutted, to be honest,” said Helen Manning, who lives in the Drynam Crescent estate and has thus far abstained from voting.
“I was hoping it would be close to 85 per cent but not quite there and that there would have been room for the word ‘guarantee’ to be put into .”
Referring to thousands of homeowners in other estates not built by Menolly who have experienced similar problems, Ms Manning said: “We have set a precedent which is not going to help the people who are coming behind us in any way, shape or form.”
She said the developer behind Menolly Homes, Séamus Ross, “has continued to build his empire while behind him the foundations of that empire are crumbling.”
John Dunne, who has lived in the Drynam Hall estate since 2006, said the outcome was probably the best the homeowners could hope for in the circumstances.
“We just have to sign the deal now and hope that he’ll fix the houses, there’s still no guarantee . . . All I’m concerned about is a guarantee that my house is going to be repaired, that it’s safe for me and safe for my children. At the moment it’s not.”
Siobhán Purcell, who also lives in Drynam Hall, said it was “another victory for the big boys that run this country”.
She added: “I think we’ve been really hard done by. They put an unfair proposal together and we’ve been bullied into accepting it.”
Residents who attempted to speak to Mr Ross after the hearing said the developer ignored them.
The case arose from a dispute between housing firm Menolly Homes, now a client of the National Asset Management Agency, and Irish Asphalt, part of the Lagan group.
Menolly blamed structural defects in houses in four Dublin estates on the presence of the mineral pyrite – which swells when it comes into contact with water – in the foundations. However, Irish Asphalt, which supplied the infill, denied this, blaming faulty construction for the defects.
The companies reached a settlement through mediation in November without admission of liability, resulting in the proposed fund. Under the terms, homeowners will get as much as €3,000 for new floor coverings, €3,000 for legal costs, €2,000 for alternative accommodation while work is going on and €2,000 compensation for inconvenience.
By LOUISE McBRIDE
Sunday January 23 2011
Another 30,000 people will struggle with their mortgage by the end of this year, economists and mortgage brokers are warning. This would bring the total number of borrowers in danger of losing their home to an alarming 100,000.
The recession and rising interest rates have already forced 70,000 borrowers to either miss their mortgage repayments -- or to change how they pay their mortgage.
"With rising unemployment, higher taxes, and the threat of higher interest rates this year, at least 100,000 people could be under stress to meet their mortgage repayments by the end of this year," said Michael Dowling, spokesman for mortgage brokers, the Independent Mortgage Advisers Federation.
There are already 18,000 borrowers turning to the State for help with repayments. The bill for the mortgage interest supplement was €65.6m last year, compared with €7.9m in 2006, according to the Department of Social Protection.
Homeowners are bracing for a double whammy of interest rate rises. As well as the standard variable rate hikes expected from Permanent TSB and other lenders, the European Central Bank recently hinted it could notch up its interest rate this year.
- LOUISE McBRIDE
By JEROME REILLY and LOUISE McBRIDE
Sunday January 23 2011
THE spectacular fall in property prices is even worse than was stated by a government economic think tank last week -- up to 300,000 homeowners are now in negative equity.
Expected interest rate hikes will mean another 30,000 people -- roughly the population of Dundalk -- will struggle to meet their mortgage payments by the end of the year.
The recession, joblessness and rising interest rates already mean that 70,000 borrowers have missed payments or renegotiated their mortgages.
Now financial institutions are expected to increase their standard variable rates.
It is also widely expected that the European Central Bank will increase its interest rate before the end of the year. This would also hit those on tracker mortgages.
Michael Dowling, of the Independent Mortgage Advisors Federation (IMAF), said: "With rising unemployment, higher taxes and the threat of higher interest rates this year, at least 100,000 people could be under stress to meet their mortgage payments by the end of the year."
The Economic and Social Research Institute (ESRI), in conjunction with Permanent TSB (PTSB), said last week that prices were now back down to 2002 levels.
But leading auctioneers Savills Ireland told the Sunday Independent that the fall had been even higher. They said that in some sectors of the market, prices were now back to the levels of 11 years ago.
Joan Henry, head of research at Savills Ireland, said: "While the PTSB/ESRI index shows that prices in the market are back to 2002 levels, Savills data for particular areas shows that houses are transacting in some cases at 2000 price levels."
She suggested that given this level of price correction and the removal of stamp duty, there was "good value" for those seeking to buy but there was unlikely to be any large increase in property transactions in the first half of this year.
"Unfortunately, economic developments in the final two quarters of 2010 have had a negative impact on both activity and price levels in the property market. Entering into 2011, continued liquidity issues in the banks, coupled with reduced disposable incomes via tax increases, will impact on sentiment and the purchasing power for potential buyers," she said.
Ms Henry suggested that the effective removal of residential stamp duty may have a positive effect on the second-hand market.
"The fact that first-time buyers are in the stamp-duty net, albeit at very low levels, could result in further price reductions for that category of buyer," she said.
Frank Conway of the Irish Mortgage Corporation said those who bought at the height of the property boom would be in negative equity and trapped with their existing lenders for years to come.
"As many as 250,000 to 300,000 mortgage holders are thought to be in negative equity. In mid-2006, more than a third of all first-time buyers purchased their homes using 100pc financing.
"Today, all would be in negative equity as house prices have fallen by 40pc or more," he said.
According to the Permanent TSB/ESRI house-price index, the fall has been 38 per cent since mid-2006.
But the index shows that house prices fell by 3.5 per cent in the final quarter of last year -- a time when consumer confidence was low in advance of December's austerity Budget.
The rate of decline in average house prices in Ireland accelerated in the fourth quarter of 2010.
However, overall, the rate of decline for the year was significantly less than in 2009. House prices fell by 10.8 per cent, compared to a drop of 18.5 per cent in 2009.
But last week, tens of thousands of workers who received their monthly salaries discovered the true extent of the tax and levy increases introduced by Mr Lenihan.
Couples on average pay have had their net income cut by €140 a month.
Workers on the top tax rate are now burdened with paying 52 per cent of their gross pay in taxes and through the new universal social levy.
Official figures given to Labour finance spokeswoman Joan Burton show that 91,000 PAYE workers will move from the 20 per cent standard rate to the top 41 per cent rate.
It means that many of those thinking about buying property will have to re-evaluate their figures to take account of drastically reduced take-home pay.
- JEROME REILLY and LOUISE McBRIDE
Sunday January 23 2011
IT'S something of a measure of the secrecy of Nama that it takes the publication of a High Court judgment on a developer's legal separation from his wife to shed some light on how the State's so-called 'bad bank' interacts with its borrowers.
For even though the identity of the developer in question remains a closely-guarded secret in the judgment of Mr Justice Henry Abbott (owing to the exigencies surrounding the reporting of cases of family law) the curious case of Mr 'YX' and his estranged wife, Mrs 'XY', offers a rare insight into the collective thinking of the Nama boardroom, and what it deems to be in the best interests of the taxpayer.
When it comes to Mr YX for example, the need for Nama to now have him manage his boomtime borrowings of €2.3bn would appear to have given him secure employment with the agency for the next 10 years.
And while the developer in question states that he is earning a relatively modest €40,000 per annum gross from the company now managing his assets under Nama (as opposed to the €6m he drew down each year during the boom), he anticipates that the agency will continue to employ that same company at a cost of €700,000 per annum as part of its agreement with him.
Not bad, you might say. But it gets better, for Mr YX at least. Elsewhere in Mr Justice Abbott's judgment, we learn that Nama is prepared to leave Mr YX living in his period house outside Dublin rather than force him to dispose of it in a 'fire sale'.
The agency is also giving consideration to the developer, finding what the judge quaintly describes as "bachelor-type accommodation" in the capital to facilitate what might be described as his work-life balance.
While such 'cosy' arrangements will anger taxpayers who believe -- rightly or wrongly -- they are picking up the tab for the excesses of Ireland's developer class, they would still seem to represent a dramatic reversal in the fortunes of Mr YX.
For according to the High Court papers relating to his legal separation, he and his wife had a "super-rich lifestyle" up to 2008, which saw them "enjoy the facility of a luxurious home, a choice of private air flights, good holidays and a good social life generally".
It was "a standard of living which might be expected of a couple whose net worth could be stated in the region of €230m," Mr Justice Abbott notes dryly, before adding: "notwithstanding their generous lifestyle, it could not be said that they led the life of the idle rich."
Indeed, Mrs XY must have had a lot on her hands in running the family home, judging by the annual household expenses of €694,418 the court papers state she incurred in maintaining their house which, according to its most recent valuation, is worth in the region of €4.4m.
Under the terms of their separation for which proceedings began in 2007, the family home and an adjoining mews house were transferred into her name solely.
Outside of the weighty responsibility attached to the upkeep of the house, Mrs XY also claims to have made an important contribution to her husband's property development business.
According to the High Court judgment, "the wife gave evidence that she was always on hand in relation to the choice of decor, furnishing and quality touch for these properties which required a luxurious and quality image, not always obtainable from the employed professionals."
While her former husband attempted to downplay her contribution to the success of his business, Mr Justice Abbott concluded that, "both partners contributed equally to the family and its welfare and resources".
But with the break-up of her marriage of nearly 30 years, which interestingly virtually coincided with the ending of the country's development-fuelled boom, all has changed utterly for the woman the court papers refer to simply as "the wife".
Mr Justice Abbott expresses a great deal of sympathy for Mrs XY's reduced circumstances.
In apportioning annual maintenance payments of €60,000 to her, he writes in his judgement: "I consider that at €40,000 per annum, and even at €60,000 per annum, the wife will have to delve into her cash sum [savings] of €600,000 to ensure the upkeep of the house -- not as a luxury item to be indulged in the face of very straitened circumstances, but as an item to ensure the preservation of the only capital of any significant worth left in the family."
The judge notes that the developer's wife may in time need to sell their family home to pay the Revenue Commissioners a tax charge of approximately €1m which she stands to incur as a result of the transfer of the property's ownership into her name from its previous ownership by a trust set up by her former husband.
Until that potential sale, the judge says however that it is "imperative that it [the house] be maintained up to its current very high standard and the valuable furniture therein retained so as to be in a position to present it well for sale in the medium term".
Notwithstanding her potential tax liability on the family home, Mrs XY would appear to be better off financially than her husband, given his decision during the boom years to give €250m in personal guarantees to secure his bank borrowings, and the very real threat that Nama may seek to call on them.
Even with that threat hanging over him however, Mr Justice Abbott holds out for the possibility that Mr YX could yet come out of Nama at the end of 10 years having paid off his borrowings and made a profit.
And while he is far from optimistic on the chances of this happening, he says, albeit subjectively, that Mrs XY would consider it a "shattering injustice" if she were to be cut off from enjoying the prospect of even a speculative return at the end of 10 years' effort from her husband.
Indeed, such is the seriousness with which the judge views the matter, he concludes that: "to cut the wife off completely would be potentially damaging to her health by making her emotionally insecure", a condition which he believes could cause her to continually litigate the terms of her legal separation.
"This is not in anyone's interest, least of all in the interest of Nama," he says.
Neil Callanan - Revenue on the warpath over developers' tax planning
The Revenue Commissioners are probably the most proactive arm of government, and as you'd expect, they haven't been slouches since the establishment of Nama.
Developers were known for their aggressive tax planning and the Revenue has written to Nama seeking information about developers and their personal circumstances. "There have been exchanges on this basis," a Nama spokesman confirmed.
Of course, the presence of Frank Daly as chairman of Nama should make the Revenue's job easier. As a former Revenue chairman, Daly recently pointed out to the Dáil Public Accounts Committee that he had had a "considerable degree of success in countering tax evasion in this country".
Nama has been sceptical of developers' asset disclosures and has used tax returns, forensic accountancy, spending records and other material to check back on their sworn statements and wealth. Given their lavish spending during the boom, some developers probably fear a large benefit-in-kind bill at the very least.
In the coming weeks the Revenue will receive another weapon for its arsenal. New mandatory disclosure regulations are designed to tackle aggressive tax avoidance schemes and take the sting out of the loss to the exchequer. Of course, it comes far too late but it's designed as an early warning system that will allow Revenue to judge the legitimacy of a scheme.
Tax practitioners did get some relief, however, with the new rules applying from 17 January, which was when they were made. In addition, they will not have to provide Revenue with a client list identifying those to whom the schemes were made available in certain cases, and the Department of Finance is to consider the impact on competitiveness of such a move. Competitiveness is key, of course, as all professional classes in Ireland are overpaid.
The review in two years will be especially interesting to see if the legislation is meeting its objectives. The few people with real money are the only ones who'll really be affected by that particular review.
The debt penalty
A source passed along an interesting nugget about Trevor Sargent's attempt to have the definition of treason widened to include economic treason – "actions that result in reputational damage for the country, an unacceptable economic cost, or a loss of economic sovereignty for the state". The 1939 Treason Act states that the penalty for treason is death (though the Criminal Justice Act revoked that).
"That would focus the mind wonderfully prior to accepting a bailout from the IMF, or indeed accepting the position of CEO of an indigenous bank," the source said. "Even a game of golf and dinner takes on a different hue in such an environment."
What does the future hold for a beleaguered property market?With so many variable factors affecting prices, Valerie Shanley asks the experts for their views on possible trends
Tomorrow may have been dubbed Blue Monday, but when it comes to the property market, the forecast is that the blues will extend well beyond January. Already just three weeks into 2011, Permanent TSB has signalled a 0.5% rise in interest rates.
There will be a degree of discrimination on the part of lenders in terms of location: KBC Bank and the ICS Building Society say they will require much larger deposits on rural homes compared to property in the capital or main cities.
Falling prices are the most direct signaller of a declining market. The ESRI published its house price index for the final quarter of 2010 last week, showing the average national house price is back to early 2002 levels.
Experts are no longer talking about the proverbial 'bottom of the market', while stark new phrases have entered property speak such as 'distressed selling', 'segmentation' and 'containment of risk'. So, the Sunday Tribune asked a number of market experts about what changes, if any, may emerge over the coming months.
Will the government finally introduce The National Property Price Register?
The Bill is scheduled to return to committee stage on Tuesday, according to the department of Justice, Equality and Law Reform. "The minister is anxious to have the final and concluding stages of this legislation enacted in law prior to the forthcoming general election," said a spokesperson. The delay is due to necessary amendments required for the Property Services (Regulation) Bill 2009, but when these are made, sale price data will be available for publication at regular intervals. But with the general election now set for 11 March, it will be interesting to see just how much will exists in forcing this legislation through. As it is, the public remains in the dark about the eventual selling price of any property, adding further uncertainty to the market. Also to consider is that the emergence of distressed sales of repossessed homes will mean even less clarity over valuation. "By not having repossession sales factored in, a price floor is set that shouldn't be there," says Karl Deeter of Irish Mortgage Brokers, adding that there are almost 12,000 households who have not made any mortgage repayments in over a year.
Prices will decline – but by how much?
No-one can pinpoint an actual figure, but the latest ESRI house price index shows that in the last quarter of 2010, (October to December) there was a marked drop in price of 3.5% (as compared to a reduction of 1.3% in the early autumn). ESRI economist Dr David Duffy says the outlook for property remains very subdued for the coming year.
"When lowered incomes, job losses and the net outflow of people from the country are factored in, the factors driving demand will remain very weak. While affordability has certainly improved, it's unlikely to translate through to significant demand and this will lead to a further decline in prices."
The decrease is now estimated at 38% from the peak of 2006 with the average price for a house nationally €191,776, and the average price in Dublin at €237,480. As these are averages, the decrease since the peak is much more like 50% in certain areas. Along with the segmentation increasing between rural areas and cities, the difference between apartments and houses is being seen in a more realistic light in the context of price also. Frank Conway, economist with Irish Mortgage Corporation, says that difference is recognised elsewhere. "When I lived on Rhode Island, for example, an apartment would be 60% of the value of a three-bedroomed house - you would never expect to pay the same for each."
With investors gone from the market, the decline in sales of apartments is one of most noticeable results of the market crash. Michael Grehan, managing director of Sherry FitzGerald, says activity in the first-time-buyer market will demonstrate this factor even more noticeably. "There is no doubt that, previously, houses and apartments had been quite close in price. But now that affordability has improved dramatically for first time buyers, they are able to bypass what would have, during the boom years, been their first purchase - an apartment - and move straight to buying a two or three-bed house."
How much tighter will the criteria for getting a mortgage become over the year?
Sherry FitzGerald notched up almost 1,000 transactions last year, says Grehan. "That would have realised about €450m. Not all of that was cash, with well over three-quarters borrowed - which shows that people were able to draw down loans." But there is no doubt that stress testing of applicants will become even tougher this year.
"The new Central Bank mantra is 'containment of risk', forcing institutions into even tougher lending criteria," says Frank Conway.
Both AIB and Bank of Ireland are lending up to 92%, while KBC are back lending again at up to 90%. In theory.
In reality, there is very little lending going on, as documentation is scrutinised so stringently. The people most affected will be young borrowers, adds Conway. "Lenders will want to know how applicants saved the necessary deposit. But if you are paying rent, and perhaps having a bit of parental support, the lender will compare that with ability to repay a mortgage. It gives an indication as to how you manage money. All of which makes the evidential support of bank statements, and all other documentation even more crucial.
"The ability to prove job security is also set to become more of an issue. The people who lost their jobs but gained re-employment are most likely on rolling contracts – which is not permanent employment, so applicants have to get around that too."
The ESRI estimates that more than 10,000 people will emigrate in the next two years - all of which affects the property market, particularly the loss of those young first time buyers who would normally prove the most active sector.
For those who really have to sell this year, is there a good time?
"Go when you are ready," says Grehan, bolstering his conviction by saying the agency has already registered over 300 new buyers to their existing list, spread across different price brackets.
"The traditional selling periods are radically changed, and it's become less seasonal," he says. "For some vendors, it may be better to hold off till the garden looks better, for others, there may be no real merit in waiting till later - only to discover that is when the greatest number of properties come on the market. It very much depends on what is being sold. And it might be wiser to go to the market in February when there is less competition. I tend to look at St Patrick's Day marking a division, and as Easter is much later this year, it may suit people to get in before that holiday."
The changes in stamp duty may also mark a change in the trading up market and that may increase activity. Previously, some owners only did it for status reasons, says Grehan, but now it's for the practical needs of growing families. "Transaction costs are lower, and with a market correction in price, plus the reduction in stamp duty, trading up will become more available again."
A marker on the calendar for May/June is the second big national property auction by Real Estate Alliance (REA).
The first such event was held last April. Back then, the organisers had hoped to sell at least 50% of the 61 lots, but on the day only 16 properties were signed off on (27%) realising a total of €3.9m. A similar mass auction had been planned for last September, but was postponed due to the ongoing banking crisis and lack of consumer confidence. Pat Riney from REA says he sees a more stable property market emerging after the general election, with buyers "who don't need much in the way of borrowing", being attracted to the auction. "We are also getting international interest, mainly from the UK, France and Germany, and where the financing is obviously not being arranged in Ireland."
Will the Deferred Interest Scheme really help borrowers struggling to meet mortgage payments?
Karl Deeter is unconvinced. "The Deferred Interest Scheme will be a total failure," he says. "It's overly complex, it doesn't actually save the person that much. I don't believe our policymakers here are superior to their counterparts in the UK and in the US where similar schemes have been tried but failed."
Deeter also believes banks are set to take a tougher stance against the 70,000 borrowers now in difficulty.
"If 10% of that figure were acted on, you could see 7,000 homes repossessed and put on the market as distressed sales. The only thing stopping banks taking back property at the moment is political pressure. Banks can avail of a receiver of rent clause in which they can claim the right to receive any rent paid. I believe this year will be a wash-out on the credit side. Fixed rates will be gone, while funding gaps in Irish banks during the year will cause significant delays in draw-downs."
McEnaney Construction goes into receivership
23 January 2011 By Gavin DalyA building firm that was rescued from examinership three years ago has been put into receivership by the National Asset Management Agency (Nama) and Ulster Bank.
McEnaney Construction, which is controlled by developer John McCann, has debts of almost €75 million.
Nama has taken over the company’s debts to Irish Nationwide and made a joint move with Ulster Bank to appoint Tom Kavanagh of Kavanagh Fennell as receiver in recent days.
The Co Louth building firm announced plans in 2006 to build the M1 Euro Park, a €200 million development on a 90-acre site outside Dundalk.
However, it ran into financial difficulties the following year, and went into examinership at the end of 2007.
McCann backed a rescue package that involved him taking a 75 per cent stake in McEnaney Construction, while Sean McEnaney, its founder, was left with a 25 per cent stake.
In 2009, the company was reported to be seeking a new investor and trying to sell off sites and investment properties.
As well as the site for theM1 Euro Park, which is still undeveloped, its assets include completed projects in Balbriggan in north Dublin and an unfinished housing development in Carrickmacross, Co Monaghan.
The latest accounts for McEnaney Construction show that it had more than €74 million in outstanding loans at the end of April 2009.
However, only a term loan from Permanent was repayable on an annual basis.’ ‘All other loans are repaid when sites or developments are sold," said the accounts.
The company valued its stocks at almost €69 million, but had a deficit of €6 million on its balance sheet at the end of the financial year.
The directors of the firm said they were confident that it would continue in business, ‘‘based on assurances made with the company’s bankers’’.
However, they warned that ‘‘the ultimate outcome is dependent on banking co-operation and on the global economic climate becoming more optimistic, resulting in profitable disposals of the company’s stock and work in progress’’.
The accounts were signed on March 18, 2010, before Nama took over the loans from Irish Nationwide.
McCann has an address in Crossmaglen, Co Armagh, but is understood to be based in Switzerland.
His main business is Castleway Developments, which is involved in property development and investment in Ireland, Britain and America.
It was set up in 2003, and claims to have a property portfolio worth €250 million.
The company’s properties include the Xerox Technology Campus in Dundalk, the Orion Business Park in Blanchardstown in Dublin and a business park in Co Antrim.
It also owns the Killin Park Golf Club in Dundalk and a business park in Philadelphia in America.
A year ago, Bank of Ireland appointed a receiver to McCann’s Broadway Capital, which controlled the €80 million Ropewalk Shopping Centre In Warwickshire.
Former steel site has cost taxpayer €50 million
23 January 2011 By John Burke Public Affairs CorrespondentThe state has spent €50 million clearing hazardous waste from the former Ispat Irish steelworks site in Cork harbour - almost twice the original estimate.
Documents obtained by The Sunday Business Post also reveal that the state has agreed to pay a €1.8 million settlement to a company that was contracted to clean up the site.
The state is also expected to pay an estimated €378,000 in legal costs in addition to the settlement with Hammond Lane Metals Company, following a row over unpaid invoices for remedial work at the Haulbowline site.
The revelations are contained in briefing documents prepared for Geraldine Tallon, secretary general at the Department of Environment prior to her appearance before the Da¤ il’s spending watchdog, the Public Accounts Committee. According to the documents , an ‘‘unforeseen problem arose as a result of the ongoing site surface clearance and related to the uncovering and excavation by the contractor of a sub-surface sludge pit of hazardous waste’’.
They continued that, ‘‘owing to the potential extent and nature of the buried hazardous waste, [and] the extent of the minimum works required to remove the risk of environmental pollution remaining unclear . . . the contractors were instructed to stop all extraction of the undisturbed buried material’’.
‘‘Despite repeated instructions to stop these unauthorised works, including from the Chief State Solicitor’s Office . . . the contractors continued to excavate significant volumes of undisturbed buried hazardous material," said the documents, obtained under the Freedom of Information Act.
It was previously known that the company had sued environment minister John Gormley, claiming that it was owed a significant sum of money.
This happened after the minister terminated a contract with the company, which had been hired in 2007 to conduct the surface clean-up at the site.
The firm sued the state for almost €8.1million.
Irish Ispat went into liquidation in 2001, and the state took custody of the site, leaving the exchequer responsible for a site investigation to decide if remedial action was needed. Examinations have found that there is no obvious threat to human or marine welfare.
However, the National Cancer Registry figures for 1994-2005 showed that nearby Cobh had cancer levels 44 per cent above the national average.
The NCR data was published in 2009. Former minister for health Mary Harney ruled out a health baseline study in the area, despite calls from local politicians, according to the documents.
The European Commission has also written to the Department of Environment, insisting that the site should have the correct waste permit to allow continued remediation of the former steelworks.
This followed a High Court ruling that the integrated pollution control licence granted to Irish Ispat was not valid.
Only five pubs sold in Dublin last year
23 January 2011 By Samantha McCaughren Business CorrespondentOnly five pubs changed hands in Dublin last year, with values reaching a new low as investors and banks went cold on the sector.
The total value of deals was less than €5 million, compared with €180 million at the height of the market in 2006 – when 37 Dublin pubs changed hands.
The low value of the transactions was partly because three of the sales in 2010 were for leasehold interests, not for the premises themselves. Auctioneers Morrissey’s said that the total value of transactions fell from €34.55 million in 2008, to €22.1 million in 2009 and €4.85 million in 2010.
The average price for a pub was just under €1 million last year, down from €4.4 million in 2009. One of the five pubs which changed hands was Pravda in Dublin 1. It was taken over by businessman Brian Montague who reopened it in October as Grand Social.
He also bought the nearby Winding Stair restaurant and bookshop, as the three businesses were being sold in a package after the Thomas Read pub group went into receivership in 2009.
Pravda was sold by Morrissey’s on behalf of Martin Ferris, the receiver for the Thomas Read Group, as was Ron Blacks on Dawson Street.
The other three pubs sold last year were the Parnell Mooney on Parnell Street, Residence on St Stephen’s Green and The IN in Dalkey. However, prices paid for licences increased slightly throughout 2010, mainly due to a reduced supply of licences available for transfer.
These are mainly bought for off-licences. Values rose by around €35,000 throughout the year, with prices in December ranging from €75,000 to €85,000, but still a long way off their peak of €175,000 in 2007.
Bill Morrissey of Morrissey’s said the optimism this time last year had proved to be unfounded.
‘‘The expectation that the market was bottoming out with green shoots on the horizon by the end of quarter one did not materialise. The challenge for the licensed trade throughout 2010 was again to continue to reduce operational overheads and, at the same time, maintain volume of trade," he said.
Potential sellers and buyers found it difficult to gauge ‘maintainable turnover’, given uncertainty surrounding the pub trade which made it difficult to calculate valuations. Prices paid at the close of the year ranged between 1.5 and 2.5 times’ net turnover, compared with 1.75 to three times’ net turnover in 2008/2009.
Less than 1 per cent of the Dublin market changed hands for the third year running, compared with the ten-year average of around 2.65 per cent.
The market trends seen in Dublin were mirrored in the rest of the country. But Morrissey said that the rural market was harder hit than cities and large towns, with continued reports of pub closures – the bulk of which were in sparsely-populated districts.
House prices to fall for two more years
23 January 2011 By Gavin Daly
House prices will fall for at least two more years as people focus on reducing their debts rather than investing, a leading analyst at Merrill Lynch has predicted.
‘‘It will be 2013 before the housing sector in Ireland will really begin to see meaningful signs of recovery," said Bill O’Neill, chief investment officer at the company’s wealth management unit in Europe Middle East and Africa. ‘‘The housing sector will be constrained for an extended period of time, there’s no doubt about that."
O’Neill said that people would be dealing with ‘‘the largest downturn in living memory’’ for several more years.
He predicted that the ‘‘period of deleveraging’’ - when consumers are more focused on reducing debts than spending money - would last up to five more years. By that measure, the downturn will last as long as the economic boom lasted.
‘‘From the point of view of asset prices and real wage growth, there are four to five years to go in the deleveraging story," said O’Neill, a Trinity educated economist who is based in London.
‘‘Deleveraging cycles tend to take about six to seven years, which would fit in with the length of the bubble cycle for Ireland, from 2001 to 2008."
However, he said there were signs that the downturn could be shortened by an export-led recovery and falling costs in the economy.
‘‘A substantial part of the competitiveness that was lost during the crazy period of the bubble has been clawed back.
You’ve got an incredibly flexible labour market, you’ve got very strong FDI, and it’s extraordinary the extent to which wages are deflating," said O’Neill,. He described the recent investment announcement by Int el as ‘ ‘ve r y important’’.
He said that the target of 2.75 per cent economic growth in the government’s four-year plan was ‘‘credible and sustainable’’ based on the strong performance of exports.
He also raised the possibility that the timeframe for Ireland’s bailout from the IMF and EU could be revised, resulting in lower payments but over a longer period.
‘‘The term [of the bailout] is a very important and a very neglected issue," O’Neill said. ‘‘I think there will be flexibility in the term and that refinancing will come as the term is extended."
However, he warned that Things would ‘‘get worse before they get better’’ in the eurozone.
‘‘There will be a need for further bold measures in the next year," he said.
Mortgage rates ‘could hit 5% by end of year’
23 January 2011 By Kathleen BarringtonRates on standard variable mortgages could hit 5 per cent by the end of the year, a leading Dublin mortgage broker has warned.
Michael Dowling predicted that the banks would continue pushing up rates this year, even if the European Central Bank held base rates steady at 1 per cent.
About 300,000 mortgage holders have standard variable rate mortgages, leaving them vulnerable to rate hikes as the banks seek to rebuild their badly damaged balance sheets. It emerged last week that Permanent TSB was to raise its variable interest rate by 50 basis points from next month.
This means that the standard variable rate payable by Permanent TSB borrowers will amount to 4.7 per cent. It is feared that other lenders could follow Permanent TSB’s lead.
Permanent TSB pushed up variable rates three times in a period of 14 months.
When the latest increases are factored in, it means that the lender has added 200 basis points to the cost of a mortgage, at a time when the ECB has left the base rate unchanged at 1 per cent.
Dowling said he feared there could be worse to come.
He pointed out that an increase in the average standard variable mortgage to 5 per cent would bring repayment s on a €200,000 mortgage up to €1,075 a month, compared with €955 a month when rates were at 4 per cent.
The Permanent TSB hike comes at a time of reduced pay and higher taxes. ‘‘It is the tipping point for a lot of people," Dowling warned.
Dowling also warned about growing evidence of members of the Garda Síochána under financial strain. He said a number of gardaí were ‘‘under phenomenal pressure’’ due to large debts incurred for property investments.
By Dearbhail McDonald Legal Editor
Monday January 24 2011
THE loans of almost 50 lenders are in jeopardy following legal actions by distressed homeowners who are challenging the authority of subprime lender Start Mortgages to lend into the Irish market.
The Central Bank has warned that the legal position of the credit institutions is under threat if the two homeowners fighting possession of their homes succeed.
The homeowners are claiming that Start is not legally authorised to make loans because it is not regulated by the State as required.
One of the borrowers, Robert Gunn, claims only the Central Bank has the power to prescribe any entity as a "credit institution" and the assumed delegation of that power to the consumer director of the Irish Financial Services Regulatory Authority is unconstitutional. The credit institutions potentially affected include the subsidiaries of major banks as well as subprime mortgage companies, car finance lenders and credit institutions that provide lease finance to borrowers.
The list has been circulated by the Central Bank of Ireland, which is being sued by Mr Gunn, who claims Start cannot repossess his home because it had no legal right to give him a loan in the first place.
Mr Gunn got a mortgage of €210,000 from Start Mortgages secured against his home at Lyre, Lisselton, Co Kerry, in 2007. Start began possession proceedings after he fell into arrears when he lost his job in 2008.
The case is set to be heard in March but Start, a notice party to the proceedings which are affecting hundreds of possession actions in the courts, is this week expected to ask the High Court to lift a stay on proceeding against Mr Gunn because of its affect on other cases.
- Dearbhail McDonald Legal Editor
By Emmet Oliver Deputy Business Editor
Monday January 24 2011
Developer Derek Quinlan has finally signed a contract to sell his property at 6 Shrewsbury Road, Ballsbridge, Dublin, with a family buying it for around €7m.
Mr Quinlan, who is now living in Switzerland, has had the property for sale for several months and despite several media reports that it had been sold, the contract for sale was only concluded last week.
Mr Quinlan will, on paper, make a killing on the sale as he bought the property in the mid-'90s for just €1.9m.
The proceeds will be used to pay off a mortgage with Bank of Scotland (Ireland) and to pay down other debts with that lender. Very little, if any, of the money is likely to be paying down NAMA debt, which is being tackled separately by Mr Quinlan.
The buyers are described as "low profile'', in a break with tradition for the area where many buyers of homes are embassies.
Mr Quinlan has other properties on Shrewsbury Road which could also be sold off. He also has property at the Merrion Hotel, which is believed to be leased out.
The Shrewsbury Road house is a large five-bedroom semi-detached property with a swimming pool in the garden. While the €7m price tag is very steep for the residential housing market, it is well below the asking price for houses on the road over recent years.
As recently as 2009, one home on the road was priced at €25m. Derrymore, the name of the house, is not the largest on the road, which only has 22 homes, but it does contain office space and a wine cellar.
Mr Quinlan travels back regularly to Dublin and is co-operating fully with NAMA, where he has signed up to an asset disposal programme.
- Emmet Oliver Deputy Business Editor
Uncertainty hangs over Section 23 tax relief
23 January 2011 By Nicola Cooke and Michelle DevaneThe controversial proposal to end tax relief on Section 23 properties is likely to be scrapped in its current form, according to tax and property specialists.
However, the Green Party has insisted that the reliefs must be ended this year in some form this year and have said amendments will be introduced to the bill.
It remains to be seen how the uncertainty over Green participation in government will influence the passage of the bill.
In last Friday’s Finance Bill, finance minister Brian Lenihan said an economic impact assessment would be carried out to examine the effect of the move.
This means the tax relief changes would have been deferred for at least one year.
However, it is understood that the stipulation that any removal of reliefs cannot come into effect until the year after the review will be removed, at the Greens’ insistence.
In theory, this means the measure could come into effect this year, but in practice this still looks unlikely, as introducing such a restriction in the middle of the year would be complicated.
The move would have affected people who bought properties using Section 23 tax breaks, which allowed them to reduce their tax bill on income from investment properties.
The change was expected to achieve €60 million in extra taxes.
Ernst & Young tax partner John Heffernan said he believed the proposal could not be ‘‘binned altogether’’.
‘‘The original proposals would have pushed more investors to bankruptcy and added to the problems of the banks.
There are a number of properties in Nama whose loans are only being serviced because investors can divert earnings from Section 23 and don’t have to pay tax on these.
As time goes on, the amount earned from the tax reliefs will reduce," said Heffernan.
Martin Phelan, head of tax advisory at law firm William Fry, said the government had shelved the legislation until at least 2012, but that ‘‘it may never happen’’.
He said the legislation could be enacted in its current form, but the next government might not sign the ministerial order.
Kersten Mehl, president of the Irish Auctioneers and Valuers Institute (IAVI), said it was probably a political decision, rather than an economic one, to leave it up to the next government.
Mehl said that if the proposed measures were implemented, thousands of investors would have faced bankruptcy.
‘‘It would have led to a surge in distressed sales, an increase in the number of properties on the market and prices would have fallen further," he said.
‘‘Investors would not be able to make the repayments and that would have had a knock on effect on mortgage repayments and jobs. It would lead to a whole avalanche of properties on top of the properties already there."
Liam Clancy, chief executive of real estate firm Capel Abbey Property, said the government’s decision to carry out a full assessment showed that ‘‘the massive financial losses and implications for investors were recognised’’.
‘‘Hopefully the effects will be analysed and the next government will act in a responsible way," he said.
Monday, January 17, 2011
There is bad news for thousands of homeowners across the country today.
According to reports, Permanent TSB is planning to increase its variable rate.
The hike of ½%, which will be annnounced later this month, will bring its variable rate to 4%.
This is likely to lead to other institutions following suit, according to Karl Deeiter, operations manager with Irish Mortgage Brokers.
"In the past it has tended that one institutional move, and then all of the others follow within a short amount of time," he said.
"I’m not saying that we’ll see everyone else move by the end of January, but certainly by the end of the first quarter of the year I would be surprised if all of the other banks haven’t increased their rates in line with the move Permanent TSB will make."
DUBLIN | Thu Jan 13, 2011 1:38pm GMT(Reuters) - Ireland's "bad bank" expects to sell three domestic commercial property assets with a value of around 200 million euros (167 million pounds) before the end of March, its chief executive said on Thursday.
Ireland's National Asset Management Agency (NAMA) was set up in 2009 to purge the domestic banking sector of risky commercial property loans.
Any commercial property sales in Ireland will be keenly awaited as investors seek a floor for a market that has been in freefall since 2008, plunging the country into crisis and forcing the government to seek an EU/IMF bailout last year.
"We'd be quite confident that we have two, but probably three major transactions that would be announced to the market by the end of Q1," Brendan McDonagh told reporters.
"It's important to get transactions going in the market," he said, adding that NAMA would not lose any money on the deals.
NAMA approved the sale of close to 2 billion euros of its property assets in 2010, which were largely UK-based deals.
NAMA has spent around 30 billion euros buying loans with a nominal value of 71 billion euros. The haircut of 58 percent has left gaping holes on banks' balance sheets and sent the national debt soaring.
McDonagh said the Minister for Finance Brian Lenihan would decide what discount to apply to those loans.
Ireland's financial regulator and the police are looking into allegations that the country's banks provided false information about their loans to NAMA to try and cushion their losses.
McDonagh told a parliamentary committee on Thursday that he had met with the police but he said it was not up to NAMA to decide whether the banks had lied.
"I am not the person to determine whether the information they presented was correct or not, or the reason for it," he said, adding that NAMA had conducted a rigorous due diligence of the loans it had purchased.
"I believe that our cautious approach has been fully vindicated."
Ireland's two-largest lenders -- Bank of Ireland (BKIR.I) and Allied Irish Banks (ALBK.I) -- said in the autumn of 2009, before the legislation creating NAMA was enacted, that they expected to face a discount of less than 30 percent on their loans.
Bank of Ireland has since had a discount of 42 percent applied to its loans and AIB has had a discount of 54 percent.
McDonagh said if a discount of 30 percent had applied across the sector, NAMA would be deeply in the red.
"We would be already, day one, 20 billion euros under water," he said.
(Reporting by Carmel Crimmins; editing by Patrick Graham, Sharon Lindores)