Estate agents all over the State worked themselves into a lather in recent months to ensure they had completed all the necessary paperwork required to qualify them for a licence to trade from the new Property Services Regulatory Authority (PSRA).
And even then, many were disappointed when their efforts didn’t meet with all of the stringent requirements, and applications were returned requesting further boxes be ticked.
So far so inconvenient, but at the same time, most practitioners welcomed the formal measures that will hopefully future proof consumers against some of the unregulated and shady practices that became evident during the recent property explosion.
It comes as something of a surprise then to discover that the new PSRA rules don’t licence or regulate valuation practitioners, ie the very people that assess properties and pronounce on their bottom line value.
This critical service is currently in heavy demand with so much bank involvement in property deals.
The valuer’s word will dictate the price at which a house might be bought or sold, or a mortgage approved or denied. The valuer will also put a nominal value on property assets for probate and family law cases. It seems odd then that such an important function is off the licensing radar.
When Around the Block asked head of the PSRA, Tom Lynch, how valuers could have been exempted from the licensing scheme, he said: “The Government just decided not to cover them, and focused instead on the property sales, rental and management areas. Valuation is a very specialised area with an extensive course of studies required to qualify. That part of the industry is covered under the Building Regulation Act and valuers tend to be registered by the Society of Chartered Surveyors Ireland.”
Lynch added that residential valuations are largely determined by location, and the property register is providing greater transparency. However for commercial properties the role is key. Lynch said he didn’t envisage valuers being included in the new licensing scheme any time soon.
Tuesday, November 20, 2012
Tuesday, October 30, 2012
None of these measures are earth-shattering or complicated but, implemented together, they are game-changers and can take Ireland from property disaster to world class, writes BILL NOWLAN
WHAT WENT so wrong in property in the noughties that the market succeeded in blowing up the entire economy?
The reality is that those who were supposed to be in control of the levers of power either did not receive the signals or they ignored them. From 2002, petrol was thrown on a roaring fire by government action, or lack of action.
But you cannot do away with the property market because it is wonderfully creative in providing homes, commercial premises and infrastructure at little or no cost to government and usually with significant tax spin-off to the Exchequer.
Basic government structures are required for any property market to exist: the rule of law; enforceable contracts; a land registration system. But in a modern urban society it goes further than basics because, in the interest of the common good, governments have to become involved in the way markets operate – and rightly so as markets are far from perfect.
Over the past 30 years, the degree of market intervention by Irish governments and in advanced societies has increased significantly. We have become a sophisticated society with sophisticated regulatory systems.
For example, our planning legislation exists to control and plan land use, we have construction regulations to impose quality control in new and existing buildings, and so on.
However, greater involvement in controlling anything – be it a car, airplane or an economy – requires the installing of feedback mechanisms and related response actions to give optimum performance. It requires informed and empowered people to interpret the information and fine-tune performance.
Such management systems in property were, are still are, missing in Ireland. The principal missing ingredient is, firstly, accurate and timely information systems and, secondly, structures to act on that information.
The reality is that no State department or agency has responsibility for the property industry and, even worse, no department has any real insight into what is happening on the strategic or month-to-month, or even year-to-year, basis in what is one of the biggest national employers and tax generators.
No State department employs a property economist or a property market researcher. There is only one part-time practising property economist in the ESRI. If one looks at the Department of Agriculture, which oversees a far smaller industry than property, it has a dedicated senior minister and nearly as many civil servants as full-time farmers.
There will always be property cycles and government must manage the economy having regard to these cycles. At the beginning of the cycle, usually coming out of a recession, it is acceptable (and often desirable) to pump-prime the market, both at the supply and at the demand side.
However, as the recovery progresses, the pump-priming incentives should be withdrawn and as supply starts to overtake demand, the brakes should be applied. This should all be done in a way that does not create scarcity or excessively drive up prices.
This would not be popular politically, but as the governor of the Central Bank Prof Patrick Honohan said recently: “Part of the role of government is to take away the punch bowl when the party begins to swing.”
The then government’s response up to about 2001/2002 was exemplary, firstly with the IFSC-type incentives and, secondly, the two reports by Peter Bacon which were fine pieces of work of analysing an overheating market and recommending actions of cutting back tax allowances and investing in infrastructure. But after initially implementing the Bacon recommendations, which cooled the market, the then government abandoned all attempts to apply the breaks and made the matter worse by introducing further tax allowances and permitting 100 per cent mortgages.
Politicians and policymakers try to defend themselves by pointing out the mistakes of other countries such as Iceland. This is a cover-up because, firstly, no other country had such a big bubble as Ireland, with a top-to-bottom collapse in value of 60 per cent-plus and, secondly, many other countries have had only minor adjustment to the worldwide banking collapse. Those countries with proper monitoring and control systems were least affected.
If we want to learn from our mistakes and from other economies, this is my formula of six steps to take Ireland from property disaster to a world-class property system (see panel).
None of these steps is earth-shattering or complicated but, implemented together, they are game-changers – they can take Ireland from property disaster to world class.
Do we go back to the same old formula that got us into trouble in the first place? The choice is with the Government.
There are little or no cash costs involved – only vision and commitment.
Bill Nowlan is managing partner of property asset management company WK Nowlan Associates. This article is based on an address he will deliver today at the 13th National Construction Conference on “The Government’s Role in the Property Market”. See wkn.ie
BUILDING BLOCKS FOR A BETTER FUTURE HOW TO FINE-TUNE THE PROPERTY MARKET
1 PROPERTY COUNCIL
Set up a property council of practising property experts with a small permanent secretariat to act as the State’s property advisory board reporting to government and key ministries, for example, the departments of environment and finance.
Appointments to the council would follow a model such as An Bord Pleanála. Its role would be to:
(a) oversee the compilation of an annual state of the property industry assessment
(b) commission expert peer-reviewed research from bodies such as the ESRI
(c) advise government about policy and implementation on matters affecting the property industry.
The remit should include planning strategy; property taxation strategy, proposed legislation impacting on the property industry and property users; and the efficient use of State property.
The Central Bank should have access to the council in the same way as the Bank of England taps into a panel of property experts.
2 PROPERTY RESEARCH AND DATA ANALYSIS
Establish a special well-funded section of the ESRI focusing on property economics and urban issues. The brief would include reporting on supply/demand, price trends and bottlenecks; preparing ad-hoc reports commissioned by the property council and other government bodies including the planning authorities.
3 PROPERTY SKILLS IN STATE DEPARTMENTS
Create property economic skill bases within the departments of the environment and finance to liaise with the property council and support the development of appropriate policy.
4 COMPREHENSIVE PROPERTY DATABASE
Develop a full national property database with wall-to-wall information on property ownership including recent deals and availability – much more comprehensive than that currently introduced by our Property Services Regulatory Authority. Its data is a big improvement but far more specifics are required.
The data should be similar to that in countries such as Singapore and the US.
The database should include planning and similar public sector information on a real-time basis.
This will move property decision-making to “evidence based” from “story based”.
5 DATABASE OF PROPERTY OWNED BY THE STATE
Progress the existing public sector reform plan commitment to develop a spatial (map-based) database of all State- and public sector-owned and leased property.
Then amend the public sector reform plan to require that once the database is in place, a regularly updated business plan (to a pre-specified format) be drawn up for every State asset, with an obligation on the owning authority to dispose of all assets not required for service delivery within, say, five or seven years.
6 PROACTIVE APPROACH TO PLANNING PROCESS
Shift the emphasis in the planning process from being predominantly a regulatory “policing” process to an asset management process involving all property in their areas.
Planning would have a proactive approach to the enhancement of the urban/rural environment, not only managing but influencing urban development and change. The mandate would include land acquisition ahead of new zoning and joint valuations with developers/landowners. There may also be a long-term role for Nama to morph into a national land authority with its huge land bank of development land.
Tuesday, October 16, 2012
THE Government is warning young couples tempted to buy a house to act now -- or lose out on a €5,000-a-year "offer of a lifetime".
In last year's Budget, Finance Minister Michael Noonan announced a mortgage interest relief deal worth as much as €5,000 a year for first-time buyer couples.
However, the deal finishes at the end of this year, and a mortgage must be drawn down by December 31 for people to avail of the offer.
In an interview with the Irish Independent, junior finance minister Brian Hayes said the deal would not be extended in December's Budget, and buyers must act before the "train will have left the station".
"This is an offer of a lifetime, it won't come again," said Mr Hayes. "All our futures are based on getting the property market going again. People need to act fast to avail of it."
There have been calls to extend the scheme as the property market stabilises, but this is being firmly ruled out. The offer made little difference in the first half of the year, with only 2,858 properties sold to first-time buyers -- almost the exact same amount as the same period last year.
However, there may be an end-of-year spike, as those who were waiting for prices to drop are forced to move or lose out on the deal. But anyone tempted to buy only has weeks to go through the mortgage process, get approval and buy a house.
First-time buyers will get up to €5,000 a year for six years in mortgage interest relief if they buy this year and Mr Noonan said his scheme was aimed at breaking the "rainy-day" mentality among the under-35s.
Mr Hayes said there was evidence of increased mortgage transactions in recent months, and urged people who may already have mortgage approval to "transact" their mortgages in the coming months to avail of the offer.
"If they don't get on it now, the train will have left the station and it will be too late to act," the Dublin South West TD said. "People should be aware that it's coming to an end, and they should buy if they can."
Mr Hayes also said the banks had a role to play in ensuring that as many people as possible get their mortgages before the deadline is up.
Mr Noonan's proposals were designed at breathing some life into the property market, targeting those who were holding off buying a house.
Mortgage interest relief will not be available for anyone who buys a house from next year, and it will be fully abolished by 2018. But for those buying their first property this year, Mr Noonan increased the amount from 15pc to 25pc.
The offer applies not just to the purchase of a house, but the "repair, development or improvement of a claimant's principal private residence".
"Even when they have a very good family income, I think the psychological effect is to save rather than invest," Mr Noonan when he unveiled the offer.
"Everybody has a rainy day mentality and I'm trying to break that."
People who already own a property can also avail of a 15pc rate, up from 10pc, until the end of the year.
- Fiach Kelly Political Correspondent
THE POWER of councillors to overturn the decisions of planning officials will be abolished in a massive overhaul of local government to be announced tomorrow.
The biggest reform of local government since the current system was instituted in 1898 is due to be unveiled by the Minister for the Environment, Phil Hogan.
The decision to curtail the planning powers of local councillors has been taken in the light of evidence given to the Mahon tribunal regarding corruption in the planning process.
As part of the reform package, section 140 of the Local Government Act will be abolished so that councillors will no longer be allowed to direct officials in respect of planning functions.
The planning system has been bedevilled for decades by the ability of councillors to override planning decisions made by the professional planners in local authorities.
The practice has been more common in some counties than in others and has been the source of continuing controversy.
The Mahon tribunal, which investigated planning corruption in Dublin during the early 1990s, uncovered an elaborate system of payments and political donations made to councillors during the planning process.
It is believed the reforms to be announced tomorrow will take account of the tribunal recommendations and are designed to ensure that similar problems do not arise in the future.
It is also expected that the reform package will involve the abandonment of plans to have a directly elected mayor for the greater Dublin area similar to the office of London mayor.
The plan was the brainchild of the former minister for the environment and Green Party leader, John Gormley.
However, the Government parties have maintained since before taking office that the creation of a Dublin mayor would cost €8 million a year and was not justified in current economic circumstances.
The nub of the reform plan, which has already been flagged by Mr Hogan, will be a substantial cut in the number of councillors and a reduction in the number of local authorities.
It is expected that some local authorities will be merged, but it is not yet clear if smaller town councils will be abolished as originally planned.
The household charge introduced by Mr Hogan at the beginning of the year will be replaced by a fully fledged property tax next year but the Government remains committed to the principle that the money will be ring-fenced for use by local authorities.
Despite the controversy and the slow start to the collection process, the Department of the Environment now believes that the compliance rate will be close to 75 per cent by the end of the year.
Responsibility for collecting the property tax has been passed to the Revenue Commissioners, who will also be responsible for collecting the household charge arrears.
Speaking at the MacGill summer school in Glenties last July, the Minister said that he had been mandated by a “reforming Government to drag the system of local government into the 21st century” so that it delivered more to the community and put people first.
CASH buyers are snapping up the majority of properties at auction, as they sell at prices 65pc lower than the peak of the housing market, a new study shows.
Experts said that distressed auction prices tend to be lower than those in the rest of the market because buyers are using cash and taking more risk.
Auctioned properties are going for prices 65pc lower than the peak of 2007, compared with a 50pc fall for the rest of the market, the Central Bank found.
And bargain-hunting buyers are generally paying with cash instead of relying on mortgages from banks.
The analysis of the Allsop Space auctions showed that Dublin properties achieved auction prices closer to market asking prices. However, houses and apartments outside of Dublin sold for less than the sellers were asking for, according to the study by economist Eoin O'Brien. Houses achieved relatively better prices than apartments.
The research, entitled 'Residential Property Auctions: What Do They Tell Us?' found that auction prices are also just over 20pc below current asking prices as compiled by the website Daft.ie.
The study took in 411 residential properties sold at seven Allsop Space auctions for a total of €52.6m.
Some 183 (45pc) were in Dublin. The majority (260) were sold on behalf of a receiver or liquidator.
The most recent Allsop Space auction was held in Dublin's Shelbourne Hotel a week ago and made €17.8m, with 110 properties successfully sold.
Meanwhile, Taoiseach Enda Kenny said AIB's move to hike its variable mortgage rate by 0.5pc for a second time in months was necessary to avoid the State having to put more money into the bank.
He acknowledged that the 0.5pc rise, announced last week, would be "difficult and challenging for people". But he said the return of the bank to a sound independent footing was of greater need.
Speaking in the Dail, Mr Kenny said although the increase would be difficult for the 70,000 affected mortgage holders, unless the bank was profitable it would ultimately result in 2.1 million taxpayers having to give it further support.
"This is a commercial decision by a bank that the Government considers to be a pillar bank," Mr Kenny said.
- Charlie Weston Personal Finance Editor
AN IRISH council is to defy the recession and go ahead with developing a €50m new town.
Cork County Council has decided the development of the new town -- Monard -- is a long-term necessity.
Monard -- which will be located between Blackpool and Blarney -- will ultimately cost €50m, will house 12,500 people and have 5,000 new-build homes.
The scheme will also involve the new town getting its own railway station, a secondary school and four national schools and creches.
However, planning for the new town won't commence until 2015/2016 -- and council plans envisage development at Monard will not be completed until 2045.
The move came after the Government agreed in June 2010 to designate 1,000 acres at Monard to be a strategic development zone (SDZ).
Monard will be the first new town built in Cork -- and also the first SDZ outside greater Dublin.
Cork planning previously focused on developing major 'satellite' towns out of existing villages such as Douglas, Carrigaline and Ballincollig.
Cork County manager Martin Riordan said the Monard plan is part of a long-term strategic blueprint to focus population growth on areas of maximum public transport availability.
However, councillors have expressed concerns that the development will funnel vital resources from existing villages and towns.
- Ralph Riegel
Tuesday, October 9, 2012
Vendors will now have to be more realistic about their asking prices for their homes following publication this week of the property price register. That applies not alone to those who ask much more than market value but also to those whose guide prices are too low.
Understandably most vendors usually want to get the best price possible for their home and traditionally most guide prices advertised for properties were pitched well above the likely selling price.
In the first few years of the market downturn, however, vendors were still in a mindset that had not acknowledged the pace at which prices were falling. Consequently those over-priced properties which were well above the new reality were left unsold for months if not years.
Then along came the Allsopspace auctions last year and the new reality began to sink home with vendors. Soon afterwards other agents began to learn from the Allsop experience and advised those vendors who wanted a relatively fast sale that they needed to slash their asking prices.
Not alone did these moves pay off in attracting viewers to the realistically priced homes but they also sparked increased competitive bidding so that properties in sought after areas have been selling for over their guide prices and recent surveys show Dublin price rises.
Furthermore in this week's Allsopspace auction a number of regional homes sold for well over their guide prices such as the three-bedroom terraced house at Tarmonbarry, Co Roscommon which sold for €141,000 or as much as 156pc over its €55,000 guide.
Just as future prospective buyers of adjoining properties will be able to use auction results to gauge their offers, the property price register too will provide prices from private treaty sales to guide prospective bids.
However, the property register comes with a health warning. Already the National Property Services Registration Authority (NPSRA) which compiles the register has acknowledged that it has made mistakes such as the instance of the two Limerick properties which the register indicated had been sold for millions when in fact they sold for only a fraction of that.
Nevertheless Tom Lynch, chief executive of the NPSRA, said that the mistakes applied to only about 20 of the thousands of prices shown.
But it is not just mistakes of which the site's users need to be wary. There can also be deals done by family members engaged in sales between each other at substantial discounts to the market values of adjoining properties.
In addition, the prices shown may reflect the much different condition of the properties.
For instance take Brookwood Crescent area in Artane, Dublin 5. Since the start of the year four houses sold on the crescent. One of these, Number 12 sold for €90,000 in January and another, Number 31, sold for €80,000 in August which on face value appears to be a price drop.
However a local agent also sold two other houses in August, and the register shows that these three bedroom houses sold for more than treble. Number 35 sold for €262,000 and number 36 sold for €285,000. The agent says that the register's prices for numbers 12 and 31 do not reflect the market reality for houses on the crescent.
So while the new price register is widely welcomed as helping to make market prices much more transparent, buyers still need to compare more than just prices when they are shopping around.
- Donal Buckley
ASSURED PROPERTY Management Ltd, a prominent Dublin property management agent, has been listed for strike-off by the Companies Registration Office.
The Irish Times has learned that a number of apartment management companies have terminated their contracts with Assured in the last few weeks.
Property agents like Assured are appointed by apartment owners, through their management companies, to manage the communal areas of apartment complexes, including the organisation of refuse collection, gardening and general maintenance.
Winton Asset Management Company, the management company for Fitzwilliam Court apartment block in Ranelagh, wrote to the owners of the apartments in August seeking an immediate levy of €750 to allow the company to continue managing the property.
“The company is in a desperate financial situation,” the letter states, and payment is imperative “otherwise the electricity supply will stop, the block insurance will cease and the refuse collection will stop”.
The most recent accounts for Winton Asset Management Company, for the year ended March 2012, show that the company was owed €56,408 by Assured Property Management Ltd at the end of March 2012.
Winton made a provision of €46,522 for the sum in its 2011 accounts, and a further €9,886 in its 2012 year. It is continuing to “endeavour to recover the amount owed”, the accounts state.
Similarly, latest accounts for St Helens Wood Management Company, which runs St Helen’s Wood apartment complex on Booterstown Avenue, shows that the company was owed €70,224 by Assured Property Management at the end of March 2011.
The accounts for St Helens state that service charges from some property owners were paid directly into Assured Property Management’s accounts, rather than St Helens Wood Management Company and the “payments by the company to APM Ltd are in excess of the value of invoices”.
Assured Property Management was established in 2001, and is believed to have managed more than 40 apartment complexes and other multi-unit developments on behalf of management companies at its peak, though most of its clients have terminated their contract with the company, with the fall-off accelerating in the last six weeks.
The directors of Assured Property Management are Ben Haskins and Orla Fitzpatrick. A spokeswoman for the company said yesterday that “any allegations of overpayment are being dealt with by our solicitors and accountants”.
Most apartment owners are shareholders in their mangement company.
While historically developers maintained control of these management companies, the multi-unit development act introduced last year required developers to hand over ownership of all common areas of apartment complexes to owners by September 2011.
Other apartment complexes that have recently terminated their contracts with Assured Property management are the Smithfield Gate complex in Dublin 7 and Dorset Square apartments in Dublin 1.
SIMON CARSWELL and MARY CAROLAN
TWO OF the State’s most ambitious developers, Johnny Ronan and Richard Barrett, will see the end of their globe-spanning company, Treasury Holdings, next week after conceding defeat in litigation taken by one of its banks.
Liquidators are expected to be appointed on Tuesday to the insolvent property business by the High Court after the company said it was no longer resisting an application by KBC Bank to have the company wound up over a debt of about €55 million. The rejection of a last-minute offer by US bank Morgan Stanley to buy the company’s debts from the State’s National Asset Management Agency (Nama), which supported KBC’s action, has led to the imminent failure of the group, sources close to the company said.
One of Nama’s top 10 debtors, Treasury has total debts of €2.7 billion, including more than €1 billion with the State loans agency.
Mr Barrett and Mr Ronan have given personal guarantees on a small amount of Treasury’s debts, while Mr Ronan has his own property portfolio and related debts with Nama.
Mr Barrett and Mr Ronan turned Treasury from one of the State’s biggest developers into an international business with projects in Britain, France, Sweden, Russia and China.
Treasury was behind landmark projects, including the five-star Westin and Ritz-Carlton hotels in Dublin and Wicklow, the Convention Centre in Dublin’s docklands, and the Central Park and Spencer Dock office complexes in Dublin.
The hotels and offices will remain open as they are solvent despite the pending liquidation of the parent company. The Convention Centre is owned by the State.
The High Court was told yesterday that, given Treasury’s decision not to fight the winding-up application by KBC, the bank will seek to appoint Paul McCann and Michael McAteer of accountants Grant Thornton as joint liquidators of the company and 16 related companies next week.
Lawyers for the Belgian-owned bank said the winding up of 17 companies was necessary given the scope of Treasury’s property interests.
Nama rejected an offer by Morgan Stanley to buy the group’s debts and an alternative proposal that Mr Ronan and Mr Barrett step aside to allow Treasury be sold by public tender, sources said.
The company felt it had no option but to accept the liquidation of the business as it believed Nama was unwilling to accept any scenario where Mr Ronan and Mr Barrett would remain as owners.
A spokesman for Nama said it had no comment to make.
Relations between Treasury and Nama fell apart earlier this year in a dispute over the agency’s rejection of offers to buy the group’s debts and the decision to seize properties within the group.
Treasury lost a court case in August aimed at stopping Nama.
The court was told yesterday that KBC did not accept an explanation for a transaction in which assets of a subsidiary of Treasury had been transferred to a company in the Channel Islands beneficially owned by Mr Barrett.
Many homeowners in negative equity are so desperate they'll clutch at any straws. Buyer beware.
With the collapse of the property market people don't have the option of selling and moving on -- the sale proceeds would never clear their mortgage.
However new mortgage products (now being offered by four lenders) seem at first glance to offer homeowners in negative equity a chance to move on. But maybe these products shouldn't be clutched at too eagerly -- if at all.
Negative equity mortgages let you sell your home and carry over whatever debt is left on a previous mortgage onto a new loan.
Recently AIB and the EBS became the latest lenders to offer negative equity mortgages. Up until then, Bank of Ireland and its subsidiary ICS Building Society were the only lenders offering the loans.
KBC Bank doesn't yet offer negative equity mortgages. However, "the is examining the possibility of introducing a mortgage which would be aimed at customers in negative equity," as part of its plan for dealing with those in mortgage arrears, according to a spokesman. Ulster Bank doesn't offer the mortgages either but "is keeping this under review". Although National Irish Bank doesn't offer negative equity mortgages, it intends to by the end of the year.
Permanent TSB only offers negative equity mortgages "in exceptional circumstances", according to a spokeswoman. "Permanent TSB has advanced a small handful of negative equity mortgages to customers who are considering trading down," added the spokeswoman. "The bank is considering whether to make a negative equity mortgage available to other customers."
With Bank of Ireland, ICS, AIB and EBS, you can borrow up to 175 per cent of what your new home is worth -- but a good chunk of that is the negative equity you'll carry over. You can't borrow more than 90 per cent of the price of the new property with BoI and ICS, and the most you can borrow, including the negative equity carried over, is €550,000. You must have a mortgage with BoI for at least two years "with a satisfactory track record" to qualify.
With AIB and EBS, you can borrow up to 92 per cent of the value of the new property -- and the most you can borrow, including negative equity, is €700,000. If the mortgage for your new property is more than €400,000, you can only borrow up to 85 per cent of the property price -- if the mortgage is for a one-bed apartment, you can only borrow three-quarters of the property price.
Such mortgages might be music to the ears of an owner who bought an apartment during the boom -- and who has had children since.
Taking on a mortgage equivalent to 175 per cent of what your property is worth however could be one hell of a noose around your neck -- unless property prices explode over the next few years.
"If people think 100 per cent mortgages were a bad idea, I can't grasp how a 175 per cent one is a good idea," says Karl Deeter, compliance manager with Irish Mortgage Brokers.
Negative equity mortgages allow banks to avoid taking any hit from a property they have financed the purchase of which has since collapsed in value, according to Michael Dowling, of the Independent Mortgage Advisers' Federation.
"When you take on a negative equity mortgage, you are paying for the loss the bank has on its own books," says Dowling. "Is it right that people should take on the negative equity that has built up on their home? Negative equity mortgages mean the bank gets its money back for a property. Some argue that the banks should take some kind of a hit."
Another drawback of negative equity mortgages is that you will lose any tracker mortgage you had on your previous home. This means that you will not only be taking on a larger debt, but a more expensive one. The mortgage interest rates available today could be as much as three times as expensive as a tracker rate.
Dowling believes that only a tiny portion of homeowners will qualify for negative equity mortgages. The high level of debt carried over means anyone applying will need a high income to qualify. Banks are also stress testing mortgages to ensure you could afford the repayments were interest rates to hit 6 or 6.5 per cent.
If you are in mortgage arrears or having difficulty meeting the repayments on your current mortgage, you're unlikely to get a negative equity mortgage.
Even if you do qualify, you might be better off financially if you pursued a different path.
Dowling believes it could make more sense for a homeowner in negative equity to sell their home -- and rent, rather than buy.
"If you sell your home and the sale doesn't clear your mortgage, you may be able to come to an arrangement with your bank to write down the outstanding debt," says Dowling. "Homeowners in negative equity need to do their numbers before taking on a negative equity mortgage. Instead of buying a new home with a negative equity mortgage, they may be better off selling their home, dealing with any negative equity left over from a house sale as an unsecured loan -- and renting another property as the family home."
If you are in negative equity and likely to be left with a substantial on your mortgage after selling your home, your bank may not allow you to sell it, particularly if you're planning to rent another home rather than take up a negative equity mortgage.
However, if you're having difficulties repaying your mortgage, and the bank allows you to sell your home, you may be able to come to a personal insolvency arrangement with your bank for any loan left outstanding. Under the Personal Insolvency Bill you can cut a deal with your bank to repay unsecured debt of up to €3m over six years.
Another option is to rent out your home to tenants rather than sell it -- and then rent another property as the family home.
- Louise McBride
Wednesday, October 3, 2012
The volume of properties now coming up for sale could push down prices even further and frighten off potential buyers unless decisive action is taken to set a floor to the market, writes BILL NOWLAN
LOOKING THROUGH the long and growing list of secondary and tertiary commercial property coming on the market from banks and their receivers, I wonder to myself who is going to end up owning such buildings and if the volumes now emerging will impact negatively on current delicate property values. Values have been stabilising of late, but the absence of bank credit to support purchases makes the situation even more dangerous.
The traditional investors in such properties, before the madness set in the early 2000s, were of three types as follows:
Firstly, the professional investor with significant holdings of secondary assets and usually with their own property management office because, believe me, such assets are management intensive and usually require lots of TLC. Such professional investors work mainly below the radar and have a policy of investing in properties such as shopping centres, older office buildings and small industrial estates many with weaker tenants. These portfolios would generally be high yielding at 10 per cent-plus and borrowings would be limited.
Secondly, you have the location-specific investors. This type of operator tends to be confined to their “home” town. Often it is the local pharmacist or butcher who quietly builds up ownership of the buildings on his street or town – sometimes over several generations. They tended to use the profits from business, surplus rent and their pension funds to put together what becomes a type of informal family trust. Such property investors are everywhere in Ireland – in every town and village – but as to their ability to buy, currently many will be suffering economically and have limited funds to purchase new stock, no matter how cheap.
The third type of investor was and is the individual or family either setting up a new portfolio or maybe in an inherited situation. Usually such portfolios have no real coherence but are put together more or less by osmosis. For example, if there are some surplus funds from profits or inheritance they go into buying whatever is then on the market. This type of portfolio would be different from the two types mentioned earlier in that it would be random and unstructured and rarely focused or well managed. Its unspoken strategy would be wealth accumulation in bricks and mortar, and possibly tax management.
The overriding characteristic of all these investors would be low borrowings, high cash yield and, of course, vacant space – the current rate of vacant space probably being high.
Look across most developed economies worldwide and you will see the same three classifications of property investors. I am deliberately omitting the institutional investor as they require prime property and I am also omitting the quoted property companies and REITs who do hold considerable amounts of secondary properties. Ireland has no quoted property sector mainly for the taxation reason of income being double taxed. I have dealt with this in greater detail below.
So this was the situation up to the year 2000. After that date a new type of investor arrived into this market with a bucket of borrowed cash, greedy advisers, bank managers with no or poor judgment, a belief that the property boom would go on forever and often unrealistic expectations. Property in secondary streets or towns became classified as “prime”, and pub chat, gullible bankers, greed and a cycle that lasted too long all induced this “new” investor to believe that such properties were great long-term opportunities.
The enthusiasm to own property and the limited supply pushed yields down from 10 per cent-plus to less than 5 per cent over the space of a few short years. Rents also rose in response to the real activity in the economy. Values often more than quadrupled as yields went down and rents went up. A property that sold for €50,000 in 1996 and was changing hands at €300,000 by 2007, is now worth €100,000 or less if it sells at all.
Of course, it was all an illusion because secondary or tertiary property does not, or rarely, changes its location or its structure. The new “value” was in the intoxicated minds of the buyers. Trees don’t grow to heaven. Many of the vendors of such properties were from one of the old groups of investors who were delighted to sell poor property at thrice its cash flow related value. As one old investor said to me in 2004, “It’s a great time to get the junk out of my portfolio”.
But it has all come crashing down and while some of the traditional investors may have caught the stardust bug, most did not and are sitting more or less as they were in the year 2000– but with rents back and income back to 2000 levels or lower – and still going on sun holidays and not generally in serious trouble with banks.
But back to my original question of who is going to end up owning such buildings and whether the volume now emerging will impact on current delicate values?
It will almost certainly be the same old group that was there before the madness, but where is the cash going to come from for the large volume now emerging on the market? Looking at the results of the Allsops auctions I see only one new category of investor emerging which is the overseas investor, usually an expat buyer with equity, who sees value in such properties in Ireland. The reality is a new form of category one, two or three described above.
The big question is can the large supply match the demand or will a growing supply and limited buyers drive prices down?
Nama appears to be withholding big volumes both of prime and secondary commercial property from the markets and the banks should be considering the same approach. In my view, the banks should be thinking about setting up their own holding funds or vehicles to take such properties into their own “warehouse” and then release them later, as and when the market can take them. Forcing down values now even further will achieve nothing and will frighten off what buyers are there. Such action would set a floor to the market. One big British bank, RBS, has already set up such a fund called West Register and is acquiring properties in Ireland that don’t meet the reserve prices. RBS owns Ulster Bank here.
Such properties generally give a much higher yield than their cost of funds and by moving from the distressed side of the banks’ balance sheet to the normal loan category, it releases working capital.
While if REITs had been introduced some time ago, we would by now have a sophisticated quoted property market which could take up some of this property. This is what happens in the rest of Europe and the US. Such REITs give a high yield to investors and if they were now operating in Ireland would be quite capable of buying some of the bigger secondary properties that may be outside the capacity of individuals to digest. Enabling REITs now in Ireland won’t create a quick fix today but may enable bank vehicles such as Ulster’s West Register to have a vehicle for emptying their “warehouses” in the medium term. An announcement about introducing REITs in the forthcoming budget would be most welcome news.
Bill Nowlan is a chartered surveyor and town planner. He is managing partner of property asset management company W K Nowlan Associates
Monday, September 24, 2012
IT'S now five years since Irish house prices started to collapse, wiping up to 60 per cent off the price of properties -- and pushing hundreds of thousands of homeowners into negative equity.
Most of those homeowners have been stuck in the negative equity trap for some time now. As well as being unable to sell their home because the sale proceeds would not be enough to repay their hefty boomtime mortgages, many have been forced to become reluctant landlords -- and at a prohibitive cost.
The dramatic collapse in house prices has prompted many homeowners to rent out rather than sell their own home. Doing so allows them to move house and put off selling their property until prices hopefully pick up enough to ensure a house sale pays off their mortgage.
Renting out your home, however, can burn a deep hole in your pocket.
You could pay as much as 55 per cent tax on the profit you make on rental income, says Cathal Maxwell of the tax website, paylesstax.ie.
The tax you pay consists of your higher rate of income tax (which could be 41 per cent) and the universal social charge (7 per cent). An ordinary PAYE worker therefore could pay up to 48 per cent tax on rental income, depending on how much they earn.
If you're self employed or living off investment income, you could also have to pay PRSI of 4 per cent on rental income -- bringing the total amount of tax paid up to 52 per cent. If you're self-employed and earning more than €100,000, you could pay as much as 55 per cent tax on rental income as your earnings over €100,000 attract a universal social charge of 10 per cent.
You can reduce your tax bill by writing off 75 per cent of your mortgage interest against rental income. However, your mortgage interest is only a portion of your mortgage repayment -- you can't write your full mortgage repayments off your rental income.
This could leave you substantially out of pocket if you're only getting enough rent to cover your mortgage repayments -- or indeed, if you can't even the rent to cover your mortgage repayments.
There are other expenses which you can deduct off your rental income when calculating the amount of tax you should pay.
Along with the tax on rental income, you must also usually pay the €200 non-principal private residence tax if you rent out your home.
Letting agents can save you the hassle of finding tenants and dealing with tenants' problems. But they don't come cheap.
You could pay a letting agent 6.25 per cent of the rent to find tenants for you -- plus 23 per cent VAT. So if you make €14,400 in rent on a property a year, you'll easily lose about €1,107 to your letting agent.
If your letting agent manages the tenancy as well as letting it out, you could pay fees of between 12.5 and 15.5 per cent a year (plus VAT). So you could pay €2,745 a year to your letting agent if you make annual rent of €14,400.
However, you can deduct letting agent fees from your rental income when calculating your taxes, thereby reducing your bill.
"If hiring a letting agent, ensure the agent is licensed and bonded," said Margaret McCormick,of the Irish Property Owners' Association, which represents landlords. To check if a letting agent is licensed, contact the Property Services Regulatory Authority (www.npsra.ie).
A landlord's house insurance is easily 50 per cent more expensive than insurance for a home you live in, according to David Hughes, director of online insurer, getcover.ie.
"Tenants are usually not as careful with your home as you would be, so there tend to be more claims for a rented property," says Hughes. "As a result, landlord insurance is significantly more expensive than insurance for a property you live in yourself." If you want to keep your house insurance bill down, it could work out cheaper to rent to a family, professionals or retired people. "Student tenants tend to result in higher house insurance premiums," said the IPOA's McCormick.
LOSING YOUR TRACKER
That cheap tracker mortgage you snapped up could be a thing of the past if you rent out your home.
Some banks will pull your tracker mortgage if you rent out your home -- but this will depend on your tracker mortgage contract and your financial circumstances.
If you're renting out your home because you're having difficulty paying your mortgage, you should be able to hold on to your tracker. But if you're renting out your home so you can buy another property or rent out a larger home, you could lose your tracker -- and end up with an interest rate three times the size.
A PTSB spokeswoman said a customer could lose their tracker rate and be moved on to a residential investment mortgage interest rate of 5.8 per cent "if the customer is simply moving from one property to another for lifestyle or other reasons".
A spokeswoman for AIB said its approach "is not to amend the tracker rate, particularly in cases where the house continues to be the customer's only property. But if a customer wishes to buy a new home, this will be subject to a separate contract. As a customer may only have one principal dwelling house, the existing mortgage would then be classified as a buy-to-let and would be subject to discussion."
A spokeswoman for Ulster and Bank of Ireland said each customer's case would be considered individually.
If you rent out your home, you must register the tenancy with the Private Residential Tenancies Board, which costs €90.
You must also get a BER (Building Energy Rating) cert for your home. A BER cert usually costs between €100 and €150 but it could be higher. You must pay the €100 household charge -- which is to be replaced by the property tax next year.
All the above financial headaches will pale in comparison to that caused by a tenant who does not pay the rent. "You could be 18 months trying to get a tenant who doesn't pay the rent out of your property," said McCormick.
"It's good to get references for tenants from employers and previous landlords -- but it's very difficult to protect yourself from troublesome tenants."
Still want to play landlord?
- Louise McBride
ALICE KRAMER, wife of the former Nama executive who is facing a criminal investigation for allegedly taking confidential information from the agency, has left her job at professional services firm, Ernst & Young.
The High Court heard last week that former Nama senior portfolio manager Enda Farrell e-mailed confidential documents to Ms Kramer before he left the agency in March to join private equity group, Forum Partners.
His action sparked investigations at Nama and at Ernst & Young, which carried out its own inquiry following a request from the State agency. The firm has completed its inquiry and passed the results to Nama.
It is understood Ms Kramer resigned from Ernst & Young within the last few days. She had a senior role in a division advising clients on compliance and other issues.
Ernst & Young has not commented beyond confirming that it carried out an investigation and passed its findings on to Nama.
The agency confirmed last week that it reported to the Garda that an internal investigation showed a former employee had taken confidential information without authorisation.
Nama said there was a possibility a criminal offence under section 202 of the Act that established the agency “may have been committed”. It also raised the issue with the Data Protection Commissioner.
The statement did not name Mr Farrell, but on the same day that Nama issued it, the agency brought proceedings against him and Ms Kramer to the High Court’s commercial division.
The issue came to light after it emerged the couple had bought a four-bedroom house and two acres of land at Sundays Well, Lucan, Co Dublin, from property dealer, Thomas Dowd, for €410,000, while Mr Farrell was still working for Nama.
Mr Dowd, a director of property investment firm Asvestus – which was originally controlled by Derek Quinlan – is a Nama client.
After learning of the deal last month, Nama suspected it may have breached its procedures and hired Deloitte to audit the purchase.
As a result, the agency learned confidential material may have been removed without its authorisation. The material included spreadsheets and other documents containing details of its largest clients.
It subsequently took in camera High Court proceedings against the couple, where it got a series of orders “directing the defendants to deliver up all documents, communications and materials which contain confidential information relating to Nama”.
It subsequently recovered data from the defendants’ computers and other storage devices and is now analysing that information.
The proceedings were moved to the Commercial Court last week and their in camera status was dropped at Nama’s request. The case is due back in court on October 4th.
Forum Partners hired Mr Farrell last March to head its Irish division. The fund, which manages $6 billion worth of assets, has reportedly begun to focus Europe’s distressed debt markets.
Meet the farmer who sold his land for €1.5m seven years ago - and bought it back for €60,000 - Independent.ie
IT IS the ultimate sign of our dramatic transformation from boom to bust.
A Co Meath cattle farmer has bought back an 8.5-acre site from a developer for just €60,000 only seven years after selling it himself for close to €1.5m.
David Gilsenan from Crossakiel near Kells proved that it's an ill wind that blows no good -- at least for farmers.
At an auction in Navan, Mr Gilsenan was one of just two bidders as he snapped up land that he himself had sold for a fortune in the Celtic Tiger years.
During the boom, the site was earmarked for a housing estate with 45 homes on the edge of the village of Crossakiel.
Three local brothers -- Seamus, David and Daniel Fagan -- bought the site and would have hoped to receive €250,000 for each of the completed three-bedroom houses.
The Kells area is well inside the Dublin commuter belt -- only an hour by car from the city centre.
But the project never got off the ground, and now only cattle rather than commuters can be found on the rich Meath pasture.
A property sign lying on the ground is a forlorn reminder of how the development site is only five minutes away from the new M3.
Yet Mr Gilsenan, whose farm adjoins the property, will not even have to remove a fence to enable his cattle to graze in the field.
The plot was never even fenced off from his own property after it was bought by the developers.
At the recent auction at Raymond Potterton in Navan, bidding started at €50,000. After four further bids the price rose to just €60,000 before it was sold at that price to Mr Gilsenan.
Mr Gilsenan, a well-known local cattle breeder, declined to comment on his bargain purchase yesterday.
A member of his family said: "This is private family business.''
At the peak of the boom, the 8.5-acre site is believed to have changed hands for about €1.5 m.
But the sale back to Mr Gilsenan is seen as part of a growing trend where development sites on the edge of rural villages are being bought by farmers and reverting to pasture.
Tom Crosse, of GVM auctioneers, said there is a realisation by banks that holding on to rural development land is pointless.
- Kim Bielenberg and Jim O'Brien
Reports of teething problems with the new system for licensing of estate agents have trickled steadily in to the Block.
Agents have been surprised by the paperwork involved, and concerns have been raised about the requirement for applicants to show they have held an auctioneer’s licence or permit issued by the Revenue Commissioners for three of the five years immediately preceding their application. This requirement has implications for women practitioners who may have taken leave to have children, or for parents who took a career break to focus on child rearing.
As one estate agent put it: “It’s desperate to have to say to a colleague with 15 years’ experience, IAVI qualifications and a third-level degree that theyre not eligible for the licence because they took time out for their family. There seem to be a lot of grey areas.”
In response, property services regulator Tom Lynch said that the office hadnt noticed this arising as a problem with applications to date. He added: We’re prepared to look at all cases, and if a person can give ample supporting evidence of a special circumstance we will listen to them.
Similarly stories are emerging from smaller agencies, in which unqualified family members help out but are no longer able to do so because they are ineligible for the new licence. According to one agent: The system could look at issuing a training certificate for people to allow them continue to work while they are studying for appropriate qualifications.
However, Lynch says the legislation in its current form doesn’t allow for a training licence, adding that the point of the licensing system is to introduce greater professionalism to the industry. Employees working closely with licence holders and undergoing a course of study can continue to work providing they are not directly engaged in the provision of property services such as price negotiations or contracts. However, they can give out information, including showing houses and handing out brochures.
So far the regulator has received 5,000 applications and, according to Lynch, 250 applicants were instructed to cease trading immediately because they didnt hold auctioneers’ or estate agents licences as issued by the Revenue Commissioners.
There have also been recent cases where traders have been told not to hold an auction because they didn’t meet the necessary requirements. In the event, a licensed colleague was drafted in to do it.
Nobody ever said the path to a professional, transparent industry would run smooth.
IRISH house prices continue to fall faster than anywhere else in the world, the IMF says in a new report. The Greeks are next, while Germans and Brazilians are seeing steep price gains.
The three countries with the steepest declines in the 12 months to March, when adjusted for inflation, are the three bailout countries of Ireland, Greece and Portugal.
Spain, which has already received a banks bailout, and which is widely expected to seek a formal bailout sometime next month, had the fourth worst decline.
At the other end of the spectrum, house prices in booming Brazil are up more than 15pc while those in Germany have gained more than 10pc. Other countries which have also had increases include the Ukraine and the Philippines.
While plunging house prices have caused well-documented problems here, rising prices are also leading to widespread angst in Germany and Brazil, where many people have been priced out of the market and rents are soaring -- creating challenges for policy makers and worries about inequality.
The IMF working paper finds that Irish prices are no longer misaligned, but are still more expensive than countries such as Germany when wages and other factors are taken into account.
Australia, which is enjoying a commodity-inspired bubble, has the most "misaligned" prices in the world, according to the study of 54 countries.
While many believe that our house price collapse was the worst in the world, the IMF study suggests that Estonia holds that distinction.
House prices fell further in Estonia, the Ukraine and Lithuania.
However, declines here have continued for longer than most other countries, which means that we may yet chalk up the worst bust in history.
The report says that house prices in the US have started to pick up a little recently, but globally prices are still on a down trend. While overall the trend is mixed, there is no sign of an uptick in the global index of house prices.
The findings suggest that long-run price dynamics are mostly driven by local factors such as income and population growth. The effect of more globally connected factors such as interest rates appears to be less strong.
Credit market conditions can have an impact in the short run and, ultimately, when the correction starts, affect both financial stability and the overall economy.
House price growth can be explained by several short-run factors, such as growth in incomes, asset prices, and population, and long-run-factors, such as the ratio of house prices to incomes.
The difference between actual house prices and those predicted on the basis of these fundamental factors gives another indication of whether prices may have more room to fall.
- Thomas Molloy
Tuesday, September 18, 2012
Can you explain to me the benefits of buying a house this year over next? My girlfriend and I are renting and have a deposit saved. She says the tax breaks are worth it, but I believe we'll save money by waiting until next year.
To mangle Shakespeare," to buy or not to buy" is still the perennial question. Have house prices more to fall?
Undoubtedly, although recent evidence has seen settling of some house types in some urban areas. If you are getting a decent interest rate on your savings, you should balance this off against taking the plunge.
Susan Cosgrove, of Cosgrove Gaynard Solicitors, explains the tax benefits of buying this year.
"First-time buyers who buy in 2012 get tax relief (TRS) at 25pc for the first two years, reducing to 22.5pc for 2014, 2015 and 2016 and 20pc for 2017, when interest relief is abolished entirely.
"The applicable maximum mortgage interest is €10,000 for an individual and €20,000 for a couple.
"Non-first time buyers also benefit with relief at 15pc from 2012 until 2017 with a max €3,000/€6,000 interest. TRS will not be awarded on any mortgages drawn down after 31 December 2012.
I understand the new property tax will be collected "by deduction". I am self-employed and pay tax each October. I usually budget monthly for this in a separate account. Should I make provisions from January for additional tax and if so, how much? I can't wait until the middle of next year to find out.
There is much we don't know about the proposed property tax, including when it will be introduced, although it's unlikely to be before the middle of 2013.
The most likely valuation basis will be self-assessed "bands". If your house is worth €100,000- €249,000 you pay X, and over €250,000 you pay Y etc.
While this has the merit of being simple, some commentators have criticised it as an urban tax as small houses in Dublin will pay the same tax as much larger ones in rural areas.
Mindful of the debacle over the household charge where a third of property owners have yet to pony up the €100, the Government will be handing over the collection of tax to the Revenue as it believes fewer people will threaten to default on it.
"By deduction" means PAYE workers will have tax taken directly out of their salary, much the same way as other taxes are. For self-employed people, it will simply be calculated along with your income tax, PRSI and USC by your accountant.
So, in the same way you are sensibly putting away money monthly for those charges, you may need to include an extra amount for this tax.
Unfortunately, I can tell you no more on how much it should be than anyone else, but the Government needs to give advance notice rather than expect people to pay retrospectively.
More could be revealed in the Budget in early December.
IT'S no secret that the collapse of the property market has forced hundreds of thousands to rent rather than buy their own home. What might come as a surprise is the cost of rent.
You could pay as much as €5,000 a month to rent a two-bed apartment in Dublin city centre, or as much as €8,000 a month to rent a five-bed house in Dalkey. These rental properties are at the high end of the rental market -- but in today's hard-pressed times, rents like that are still jaw-dropping.
The two-bed, two-bathroom apartment in Dublin city centre which is quoting a monthly rent of €5,000 is on Grafton Street. It's "an exceptional penthouse apartment with spectacular views of the city", according to Lisney, which is advertising the apartment.
"There are not that many good penthouse apartments in Ireland," said Joan Fogarty, manager of residential lettings in Lisney's St Stephen's Green branch. "There's not a huge demand for penthouse apartments today -- but there are some people who will pay that kind of rent."
While properties such as this are often rented by corporations for senior executives, professionals and others who like the convenience and views of the city are also interested, according to Fogarty.
Out in Dalkey, meanwhile, Kilross Cottage -- a five-bed, five-bathroom house on Sorrento Road -- comes with a monthly rent of €8,000.
The architect-designed house, which includes a swimming pool, had previously been rented for €8,500 a month, according to Terrie Dunne, managing director of Terrie Dunne Letting Agents, which is advertising the property.
Although Dunne admitted that she was unlikely to get someone to pay rent of €8,000 a month for the property, she said "there's a lot of money around".
Let's face it though, the ordinary Joe Soap is miles away from affording rent of €5,000 or €8,000 a month. But other less expensive properties in or near Dublin city are still out of reach of many people.
For example, you could pay €2,000 a month to rent a two-bed apartment in Grand Canal Dock, Dublin -- and you'll easily pay between €2,500 and €3,000 a month to rent a two-bed apartment in Sandymount's Shrewsbury Square.
Rent isn't as steep outside Dublin. However, you could still pay €1,000 a month to rent a two-bed apartment in or near Galway city, or €2,500 a month to rent a three-bed penthouse apartment there. A two-bed apartment in Cork city could set you back up to €1,200 a month.
RENTS ON THE RISE
Rents are also on the increase in certain parts of the country.
It costs €1,709 a month to rent a three-bed home in Dublin city centre -- almost 12 per cent more than rent for a similar property cost a year ago, according to the latest report by Daft. The cost of renting a three-bed home in a Galway city suburb has increased by almost 5 per cent over the last year, while rent for a three-bed home in a Cork commuter town is up 3 per cent, according to Daft.
The cost of renting a family home in Dublin and Cork could increase further over the next year -- but rents are unlikely to increase outside these cities, according to Ronan Lyons, economist with Daft.
Lyons, however, warned that the cost of renting one-bed apartments could soar in six months' time when new renting regulations come into force.
Under these regulations, each flat, apartment or house must have its own toilet and bath or shower --effectively heralding the death of the bedsit. The regulations already apply to properties that were rented out for the first time after February 1, 2009.
Many of the properties rented out before February 2009 did not have to meet the new regulations -- but most of these won't be able to escape the new rules after February 2013.
"Some landlords, particularly those renting property in Dublin's Rathmines or the North Circular Road, will get out of the game once the regulations come in," said Lyons. "They may not be interested in investing in their property to ensure that each flat or bedsit has its own bathroom."
This in turn could prompt many landlords to sell their properties -- leading to a shortage of one-bed apartments or flats in or near the city centre.
This shortage would most likely drive up rental prices for one-beds.
The huge demand for rental properties is also pushing up the cost of rent, according to Stephen Large, manager of the Dublin office of the housing charity, Threshold.
"It's getting a little bit more difficult to find a property to rent than would have been the case a few years ago," said Large.
So is your landlord entitled to push up the rent willy-nilly?
"If a landlord wishes to increase the rent, he or she can only do so once a year -- and 28 days' notice must be given," said Large.
If, however, your landlord improves or renovates the property, he or she may be entitled to push up the rent more than once a year. But the rent cannot be higher than the market rate -- in other words, the cost of renting similar properties in the area.
Another factor that could potentially push up the cost of rent is the upcoming property tax.
Some landlords have already passed on the cost of the precursor to this tax, the €100 household charge, to tenants. Large said the property tax or household charge should not be passed on to tenants. However, the Irish Property Owners' Association, which represents landlords, says this depends on the rental contract.
Another major headache for renters today is the increased repossessions of buy-to-let properties.
A tenant could find that the property they are renting is being repossessed by a bank, or that a bank has appointed a rent receiver to collect their rent after the landlord fell behind on mortgage repayments. A repossession of a property shouldn't affect your tenancy -- but if you feel your tenancy is under threat, get in touch with the Private Residential Tenancies Board, the State body charged with upholding tenants' rights.
If you get a letter from a rent receiver demanding you pay your rent to him/ her, get in touch with your landlord first. "If there is a rent receiver collecting rent, the landlord should notify the tenant first -- otherwise, you should get in touch with your landlord before paying anything over to a rent receiver," said Large. "Tenants are getting caught in the middle of all this."
With banks being urged to get tougher on those falling behind on mortgage repayments, it looks like tenants will be caught in the middle of the property collapse for some time yet.
- Louise McBride
TENANTS will find it easier to get their deposits back from landlords under a new system being introduced by the Government.
The withholding of deposits by landlords accounts for almost three-quarters of all complaints by tenants to the State's private rental watchdog.
The disputes are costing the Private Residential Tenancies Board almost €500,000 a year to resolve.
Among the options is having tenants pay their deposit to a middleman who would hand it back when they move out of their rented house or apartment.
If there is a disagreement over the condition of the house or missing items, the landlord and the tenants have to send photographs and lists of contents by post or email to a special dispute resolution panel.
Another option is to allow landlords to keep the deposits but pay a small premium to an insurance company.
This means that a tenant can get the deposit back from the insurance company if the landlord refuses to hand it over.
Both of these systems are in operation in England and have radically reduced the number of deposits being withheld unfairly by landlords.
Consultants hired by the Government are doing a cost-benefit analysis on the best type of deposit protection to bring in.
Junior housing minister Jan O'Sullivan said she was determined to introduce a new system to help ease the problem.
"I know so many cases of tenants who didn't get their deposits back. One of my own children didn't get their deposit back," she said.
Ms O'Sullivan said she would bring forward an amendment to the Residential Tenancies Bill that is currently before the Dail once the best system was identified.
Her aim is to have the new system in place by next year.
"There are some cases where landlords are quite justified in holding on to deposits. We want to ensure we get it right," she said.
The new deposit protection system should lessen the workload of the Private Residential Tenancies Board, which has a waiting list of up to eight months to decide cases, mainly because of the number of disputes over withheld deposits.
The bill will also scrap the €25 mediation fee for tenants and landlords to encourage more of them to resolve their disputes quickly rather than going to a full tribunal hearing.
MORE than half of the 5,000 applications for licences required by estate agents from the Property Services Regulatory Authority (PSRA) have been rejected.
The PSRA has confirmed that only 40pc of applications (2,000) received by the deadline of July have been accepted. The body has written asking the others to apply again.
Reasons given for the rejections include forms filled out incorrectly, missing data, details of qualifications that were not deemed relevant, cheques drawn out wrongly and incorrect tax clearance information.
It has also emerged that around 250 agents are being barred from providing professional property services because they sent their applications in late -- and it could be well into next year before they get the opportunity to re-apply for a license.
Under new legal requirements, auctioneers, estate agents, lettings agents and management companies now need an operating licence issued by the PSRA.
A PSRA spokesman said: "This is a new process, and a number of unexpected issues have arisen -- for example, the situation where accountants have told applicants that they can't get relevant tax clearance because they are jointly assessed.
"We've had to show them how to get such clearance from the Revenue Commissioners. It's quite a complex process for the applicants, and we've provided a 40-page booklet to tell applicants how to proceed."
While the spokesman would not be drawn on when all the applicants would likely be licensed, it is hoped this would happen before the end of the year.
"Once the applications have been made they can continue trading as per normal, even if the first submission has been rejected," he added.
"It's important to note that those agents who've had forms sent back to them are not excluded from the licensing process. Once the correct forms have been supplied, we will then make a judgment on their application.
"If we judge for whatever reason that they don't qualify, they'll still be able to appeal. It's the first time this process has been embarked on, and therefore it will likely take some effort to get it right."
Fintan McNamara of the Institute of Professional Auctioneers and Valuers (IPAV) said the application process was far too complicated.
"Our members have had all sorts of issues with getting up-to-date certificates and with educational issues," he said.
"You have to question why it seems to be so complicated, but it's the law and we have to get licensed.
"I would, however, question why we have to register every year when in other countries every three years or even every 10 years will suffice."
- Mark Keenan
Monday, September 10, 2012
ANY liquidator appointed to Irish property company Treasury Holdings will be expected to investigate the recent purchase of two Singapore companies by Treasury director and shareholder Richard Barrett.
The row over the €2.3m purchases deepened last night after the Singapore-listed company in which Mr Barrett and his Treasury colleague, Johnny Ronan, are major shareholders warned its former directors of possible action if they publicly discuss confidential company matters.
This follows media reports in which some former directors alleged that a report from Goldman Sachs had valued the purchased companies at €32m.
Treasury Holdings Real Estate (THRE) said reports in Ireland that quoted statements "allegedly made by former independent non-executive directors of THRE" had come to its attention.
"Unit holders are advised to exercise caution when trading, based on media reports which may not contain accurate or complete information," it said.
"In addition, the board takes a serious view of any breach of confidentiality, even if made by former directors, and will review if any such breach has occurred."
Mr Barret has said the companies -- Treasury China Trust (TCT) and Treasury Holdings (Shanghai) Property Management (THSPM) -- were separately valued by two Irish accountancy firms and he paid the higher of the valuations.
The purchases have already had repercussions in the Irish courts, where NAMA (National Asset Management Agency) and KBC are seeking the winding-up of Treasury Holdings.
NAMA had been "neutral" on the action, but joined in the petition for a winding-up when it learned of Mr Barrett's purchases.
Treasury has promised to submit an affidavit giving details of the transaction to the High Court by Friday, pending a ruling on the winding-up next month.
Counsel for Treasury pointed out in court that a liquidator can examine any transactions over the previous two years and they can be reversed.
It is likely that any liquidator charged with maximising payments to creditors would do so on behalf of NAMA and KBC.
NAMA is owed €1.75bn by Treasury and has appointed receivers to several projects where loans are not being met, while KBC is owed €75m in connection with the Spencer Dock project in Dublin.
The Singapore-based TCT is not directly linked to Treasury Holdings, but a liquidation of the latter might affect covenants with its lenders.
Some former directors, who were removed in July, have also been quoted commenting on corporate governance issues.
- Brendan Keenan
Can it be true? Has the property market truly bottomed out? And not only that, but showing some signs of life?
Well yes and no. Very encouraging signs are there for all to see. The newspaper property supplements are less anaemic and signs proclaiming "Sold" which have been as rare as hens' teeth are suddenly being seen in some of the better Dublin enclaves. Agricultural land is making record prices.
And there are tentative signs that if potential buyers can survive a searching examination of their finances -- now so intimate that it would shame a proctologist -- there are mortgages being approved.
Even property auctions, a leit-motif of the halcyon days of the boom, are making a re-appearance after a five-year absence.
While there are huge tracts of the country where the residential property market is still on life support there are at least some signs elsewhere that suggest the patient is out of intensive care.
Recovery has started in Dublin, not all of the capital, but in the areas where there are good family homes near the better schools and with access to good public transport and other infrastructure.
Robert Ganley of auctioneers Knight Frank said there is no doubt that there has been a substantial increase in demand for family homes in good locations.
"There is a big rise in the number of viewings, but more importantly we are actually seeing competition for properties that are currently priced. We are seeing two or three bidders with evidence of funds. These days we would always seek evidence that funds are available and approved. We are seeing competition among people with hard cash and people with loans approved. That's something we haven't seen for five years or so," said Mr Ganley.
He said the family home sector is strong -- particularly in the €400,000 to €800,000 range and that's where competition for good houses in hotting up.
"At the higher end of the market, the €1.5m to €3m range, we are seeing a lot of ex-pats coming back to Ireland and buying. The majority of those deals are being funded by money which has been earned abroad, either in sterling or other denominations. They are coming back for a number of reasons but we have seen that one of the main factors is their desire to educate their children here," he added.
Mr Ganley points out that fees in a good private school or boarding school in Ireland are about €15,000 while a similar school in the UK could have annual fees of £30,000.
"That's a big saving. The other sector which is coming back are those ex-pats who are planning retirement, maybe not now but in five years' time. They are saying 'now is a good time to buy in Ireland, the euro is weak and there is value and the market has bottomed out'," he said.
He believes there is still cash out there held by people who did sell up in the good times and decided to rent.
"They are coming back to buy. Also there are those younger people who have always rented who are now tempted to buy because rents are going up so it's nearly starting to be cheaper to buy," he said.
The increase in the number of auctions is a positive sign.
"We have put a number of properties to auction and plan more in the next few months. It's a sign of better demand.
"In some ways, when you go to auction you do limit your market but, depending on the property, if you do have a number of potential buyers with cash or are mortgage approved then it can be advantageous," he added.
Mr Ganley said they are seeing real interest in good country properties with land that are well priced.
Interest is coming from the UK particularly and from ex-pats coming back from the Americas and the Middle East.
"There's a lot of nonsense spoken about the American market. In essence they are Irish people from America who are buying. There's always an Irish link. An American living in Houston, Texas, doesn't just jump up and decide 'Actually I'm going over to live in Ireland tomorrow.' Either he is Irish or his wife is Irish. There is a connection."
Irish living abroad are helping fuel the recovery in certain segments of the property market.
Analysis of their own sales by Knight Frank shows that -- for the Dublin south residential market this calendar year for sales agreed and sold -- 55 per cent of houses in the €1m to €3m bracket were sold to ex-pats with money earned abroad with no mortgage at the time of purchase. Half of these were UK-based, 25 per cent Europe and 25 per cent from the Middle and Far East.
In the country properties, market this year ranging in price from €400,000 to €2.5m, 46 per cent were bought by UK-based ex-pats, nine per cent by US-based ex-pats and 45 per cent by Irish living in the Republic.
Knight Frank is selling Inish Turk Beg Island in Clew Bay, Co Mayo, which was transformed by the Egyptian-Irish businessman Nadim Sadek, who turned it into a hip super luxury retreat that can accommodate 36 people in a series of houses.
"Anyone could end up buying that. We have had really good international interest. The guide price is €2.85m," said Mr Ganley.
Will Coonan, of Coonan auctioneers, said there is a definite improvement in the Dublin area, specifically Castleknock, Clontarf and south Dublin where asking prices are sometimes being exceeded.
"In the areas 12 to 20 miles from Dublin the demand is also noticeable with certain types of properties becoming easier to sell -- particularly good three or four-bedroom semi-detached and some quality detached houses.
"Prices vary considerably but demand for houses in the €450,000 to €750,000 is quite strong in the city areas and €250,000 to €450,000 outside the city," he added.
He said that in recent months Coonan's has had to put some of the more sought-after family homes to "best and final bids" because of the lack of supply for what the market is demanding.
But getting mortgages continues to plague the market despite the banks' claims about their availability.
"They are available but the slow progress for applications and the continuous questioning of their financial history can often test the patience of many applicants. Mortgage approvals that last for more than 90 days would help purchasers in their hunt for a property and greatly assist purchasers acquiring a new home which has yet to be completed," he said because fitting the viewing process, negotiation and conveyance all within three months is generally not possible.
"Despite the constant talk about ghost estates a shortage of good quality new homes is becoming apparent in the cities and the stronger commuter towns. There has been good demand from first-time buyers to avail of Mortgage Interest Relief and with sales required to be closed prior to December 2012 to avail of that tax relief we have recently had good activity here in Co Kildare in places like at Moyglare Hall, Castlepark and Griffin Rath in Maynooth, The Ryebridge in Kilcock and Hazelwood in Celbridge which is currently sold out," he said.
But Mr Coonan warned that to fund the construction of a new development requires capital from the financial institutions.
"Unless this becomes available developers and builders will simply not have the ability to build the new homes that are required in areas where demand is now apparent.
Simon Ensor of Sherry FitzGerald said that they now have 7,000 potential buyers registered at their offices nationwide -- a return to pre-boom figures.
"An even more interesting fact is that, when we asked them, 4,000 out of the 7,000, claimed they were cash buyers. That is hugely significant. There is no doubt the banks are still being very, very selective about who they approve and for how much. So a market which is not dependent on conventional mortgage lending is very important and very significant."
Mr Ensor said the result is a bit of vibrancy in the market.
"When you are selling a good family home in the right location not only will you have one potential buyer but you would have two or three."
He said there is no doubt that word has filtered back to those people who went into rental accommodation waiting for the market to bottom out that it now appears that point has been reached.
"Not only that but there is definitely an upward nudge in specific sectors," he added.
Another pointer is that people who are actively looking for homes in the well-established areas are seeing it for themselves at viewings.
"Last weekend in Dublin we had a house on open view and we had 56 parties looking at it. That's back to the more traditional market that existed until 2006. The good thing is that people have realised the bottom has been achieved and they are not going to save another 10 per cent by waiting until next year."
"At the more affordable end of the market it is now consistently cheaper to buy and service a mortgage rather than pay rent," Mr Ensor added.
- JEROME REILLY
by Sunday Business Post 9.09.12
The ruling council of the Law Society has decided by 21 votes to eight to adopt the controversial report of the Conveyancing Conflicts Task Force.
Law Society president Donald Binchy, in an e-message to solicitors last Friday night, said the council vote followed "a lengthy and thorough debate - the third such debate the council has had on this issue in recent months".
The proposals, which were strenuously opposed by some rural solicitors and farming groups, will require all parties to land transactions to be separately legally advised in order to avoid conveyancing problems, particularly related to elderly people signing over family farms to relatives.
The new regulation will prohibit solicitors from acting for both vendor and purchaser in conveyancing transactions, with "very limited and defined exceptions", from the start of next year.
"I am aware that this regulation will not meet with the immediate approval of all colleagues," said Binchy. "However, I believe that, over time, the profession as a whole will consider that the adoption of this regulation was the right decision and will benefit both the public and the profession."
Before last Friday's meeting, council members had circulated emails to other solicitors opposing the measure.
Maura Derives of Derives Sexton & Co Solicitors, Carrick-on-Suir, Co Tipperary, proposed an exception for gifts of property where the transferor had a certificate of legal advice from an independent solicitor. She said this exception would enable clients to instruct "a trusted adviser" with whom they had had a "long-standing relationship over generations".
Derivan said the role of the family solicitor was "fundamental to the sustainability of many solicitors' firms across the country".
In addition, Derivan proposed an exception for transactions in which the certified open market value of the property was under €7,500. She said there should also be an exception to the ban for legal, financial or accounting profession-als in current practice: people who had been carrying on a business for the previous five years and companies associated with such individuals.
Council member William Aylmer, managing partner of Compton Aylmer, emailed colleagues to say that a "diverse group of colleagues, representing provincial and city firms alike, both large and small" had expressed concern about the proposed regulations.
He asked solicitors to email their objections to Law Society, with copies to him. Aylmer told The Sunday Business Post he would not comment on the number of objections received, as council meetings were confidential.