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
Monday, September 24, 2012
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.
By Finbarr Flynn and Joe Brennan
Thursday, September 06, 2012
Lars Frisell thought it would be easy to find an apartment to rent in Dublin, the epicentre of western Europe’s biggest real estate crash, after he moved from Sweden to become chief economist at Ireland’s central bank.
Three months later, he’s still looking, joining students, hi-tech professionals, and would-be homebuyers competing for space and pushing up rents in the Irish capital.
"You’d think that there’d be so many apartments and so many houses available," Frisell told a gathering of Irish accountants last week. "There’s not."
The property crash has encouraged people to rent rather than own their properties, lifting the number of households in rented accommodation by 47% in five years, the Central Statistics Office said. That creates a chance for real estate investors to profit from higher rents.
Kennedy-Wilson Holdings wants to own more than a thousand homes in Ireland after purchasing a 210-apartment block close to Google’s European headquarters, said Peter Collins, the Dublin-based managing director of the group’s Europe arm.
Kennedy-Wilson teamed with Canadian insurer Fairfax Financial Holdings to buy the apartments for about €40m in June.
Average rents have fallen about a quarter since the market’s peak, less than the 50% fall in prices. In Dublin and Cork, rents have risen on an annual basis for the last six quarters even as prices fell, according to Daft.ie.
Rents for three-bed properties in Dublin rose 12% to €1,709 a month in the second quarter from a year earlier, while the average rent across all property types rose 1.8%.
Monday, September 3, 2012
Residential property prices down 13% on last year - The Irish Times - Fri, Aug 31, 2012 via @elaineedwards
NATIONAL RESIDENTIAL property prices fell by 13.6 per cent in the year to July but rose by 0.2 per cent in the month.
This compares with an annual rate of decline of 14.4 per cent in June and a decline of 12.5 per cent in the 12 months to July of last year.
The slight rise in property prices in the month of July compares with a drop of 1.1 per cent in June and a decline of 0.8 per cent in July 2011, according to the residential property price index published by the Central Statistics Office yesterday.
In Dublin, residential prices fell by 0.3 per cent in July and were 16.6 per cent lower than a year ago.
House prices in the capital were down 0.2 per cent in the month and were 16.7 per cent lower than a year earlier.
Apartment prices were 19.6 per cent lower compared with July 2011.
Residential property prices in the rest of Ireland (excluding Dublin) were up 0.3 per cent in July compared with a drop of 1.3 per cent in July of last year. Prices were 12.1 per cent lower than in that month.
House prices in the capital are now 56 per cent lower than at their highest level in early 2007, while apartment prices are some 63 per cent lower.
Residential property prices in Dublin are 57 per cent lower than at their highest level in February 2007.
In the rest of Ireland, the decline in the price of residential property since that time is 47 per cent, while overall the national index is 50 per cent lower than at its height in 2007.
Davy chief economist Conall Mac Coille said the data reflected transactions in the first half of 2012. New mortgage lending had hit a fresh low of just €974 million, well down on the €1.26 billion in the same period last year.
Prices reflected a “dysfunctional market”, with a very low level of transactions, particularly in rural areas.
Davy said anecdotal evidence suggested cash purchases accounted for up to 40 per cent of transactions, given weak lending, and that a lack of supply had supported prices in the Dublin area.
The firm noted census data that showed the number of households with a mortgage and in unemployment had increased from 14,757 in 2006 to 50,792 in 2011.
“We retain our view that repossessions will have to rise and, coupled with weak mortgage lending and a slow recovery in the economy, house prices will fall further.”
Merrion Economics said it did not see a major improvement in the housing market until there was clear evidence that Ireland’s jobless rate had peaked and was on a sustained downward trend.
“Furthermore, the uncertainty of how a proposed property tax will be calculated is also likely to weigh negatively on house sales/ prices in the run-up to December’s budget.”
KBC chief economist Austin Hughes said it was far too early to make any definitive judgment, but the broad picture emerging was one of a “tentative stabilisation”.
“There is a consistent message across a range of domestic economic indicators that things have stopped getting worse, though that doesn’t mean there will be a dramatic turnaround.”
Property website MyHome.ie, which is owned by The Irish Times, said it was “a little surprised” at the figures, adding that a cautious approach should be adopted when analysing them.
“The new property register, which will record actual transaction prices, is due to go live next month and that is a very welcome development,” said Myhome.iemanaging director Angela Keegan.
Aoife Brennan, head of research at Lisney, said she was not surprised at a monthly decrease in the Dublin index.
For some time, the agency had believed the CSO index was “lagging the market” by about six months.
“Consequently, we believe that the CSO index is under-playing the fall in residential prices.”
WANT TO KNOW how much the jumped-up Smiths paid for the semi on the same street as yours? Next month the new database of house prices will allow you to find out what your neighbour forked out for their house. This will be done by typing an address into the State-run database to be operated by the Property Services Regulatory Authority, the CEO of which is Tom Lynch.
With solicitors obliged to complete conveyancing promptly for stamp duty purposes, the registrations will be updated on a constant basis. From then on interested parties will no longer have to guess the selling price or try and decipher what precisely is meant by “in the region of” or “close to the asking price”.
The shame is that Fianna Fáil didn’t deliver on its pledge to set up the database when the market was hopping. In 2007 and 2008, house sales were around 400,000 per annum; by 2008 they had fallen to about half that number. They subsequently dropped to around 130,000 and when the PRSA launches the new service in a few weeks it is expected to show that between 80,000 and 100,000 houses were sold from the starting date in January, 2010 to last month.
THE BOTTOM LINE: THE FULL extent of the distress in Irish home loans was laid bare in the latest set of figures published last week by the Central Bank, including for the first time mortgages that slipped into early arrears.
All the banks, with the exception of Permanent TSB, once the country’s biggest mortgage lender, have individually reported results for the first half of the year (Permanent TSB publishes its figures today). If you line the figures up, a clear picture emerges of just which lenders have the most distressed owner-occupier mortgage books.
The Central Bank’s figures to June show that 10.9 per cent, or 83,251 out of 761,000, of Irish home loans were in arrears. By value, the equivalent figure was 14.7 per cent or €16.5 billion of total mortgages of €112 billion.
All told, 168,000 mortgages were in some form of financial difficulty at the half year.
Residential mortgages at the former Irish Nationwide Building Society, now managed by Anglo Irish Bank – sorry, Irish Bank Resolution Corporation – win by a country mile the title of Ireland’s worst home loans.
Described by IBRC chief Mike Aynsley as “Ireland’s answer to subprime”, Irish Nationwide’s €1.4 billion owner-occupier mortgage book is performing horrendously. About 44 per per cent of this book was either in arrears of at least 90 days or impaired.
The best-performing book is at National Irish Bank where the bank’s low-risk policy of avoiding high loan-to-value mortgages left 90-day arrears at 3.5 per cent by number and 5.5 per cent by value of its €2.6 billion owner-occupier Irish mortgages in June.
Also, at the sunnier end of a grim scale are Bank of Ireland and AIB. The country’s two biggest banks – which are respectively 15 per cent and 99.8 per cent owned by the State – have better-performing home loans.
Bank of Ireland’s arrears of 90 days or more stood at 7 per cent of its €21 billion owner-occupier Irish mortgages (or 9.2 per cent by value) in June, while AIB’s arrears of 90 days amounted to 9.4 per cent of the bank’s €32 billion owner-occupier Irish mortgages (or 12.9 per cent by value).
These are below the average arrears figures for the industry at the half-year published by the Central Bank. Given that owner-occupier mortgages at the two banks account for just under half of the €112 billion checked by the Central Bank, this implies that arrears levels across the other lenders are far worse than both their figures and the industry average.
Of the other big home lenders, Ulster Bank and Permanent TSB as the two fiercest competitors in the mortgage market during the boom years – and Bank of Scotland (Ireland) to a lesser extent – have far greater levels of stress in their mortgage books.
Royal Bank of Scotland-owned Ulster Bank uses a classification that it calls “risk elements in lending” (reil) to describe impaired loans and loans in arrears of at least 90 days.
In the UK bank’s half-year results, RBS put 13.4 per cent (by value) of Ulster Bank’s £19 billion (€24 billion) mortgage book in the reil bucket. The bank does not, however, break out figures between owner-occupier and buy-to-let mortgages and the £19 billion figure includes mortgages in Northern Ireland.
Ulster Bank’s 90-day arrears are said to be below the Central Bank’s average but the mortgages advanced by subsidiary First Active, an aggressive lender of 100 per cent mortgages during the go-go years of the boom, pushes the arrears over the Central Bank’s average figure for the industry. (First Active was subsumed into Ulster Bank in 2009.)
Arrears at Belgian-owned KBC also rank above average. Almost 16 per cent of its €9 billion home loans was non-performing, or in arrears of 90 days or more, on June 30th.
Lloyds disclosed in the half-year results that 22 per cent of €8 billion in mortgages at the former Bank of Scotland (Ireland) were impaired, but the UK bank has not provided any breakdown on the level of 90-day arrears.
That leaves Permanent TSB – and more will be revealed today – but arrears on the State-controlled bank’s Irish home loan book, which totalled €18.7 billion of loans last December at the half-year, are said to be well above the Central Bank’s industry average.
Permanent TSB was until this year an afterthought when it came to the efforts to repair the banks. Given that the bank is almost fully State owned, one of the worst-performing mortgage lenders and the biggest Irish banking problem yet to be solved, the forensic oversight to be taken of its restructuring by new management – as set out in the latest set of EU-International Monetary Find targets published last Friday – is long overdue.
It will also be the biggest beneficiary of any EU-approved deal agreed this autumn to carve out soured mortgages – the third wave of asset purges from the Irish banks after the transfers to the National Asset Management Agency and to “non-core” units of the banks.
This deal aside, with the extent of problem home loans now clearer, the next task for the banks is to work them out, loan-by-loan.
DUBLIN’S BURLINGTON Hotel, bought by property developer Bernard McNamara at the peak of the property boom in 2007 for €288 million, is back on the market with a guide price of €65-€75 million.
Agent CBRE Hotels is handling the sale on the instructions of Paul McCann of Grant Thornton, who was appointed receiver by Bank of Scotland (Ireland). The Lloyds-owned bank is using loans specialist Certus to run down its banking operation in the Republic.
Mr McNamara has been one of the biggest casualties of the property crash with overall debts of €1.5 billion.
The Burlington is the second largest hotel in Ireland after Citywest in Co Dublin, with 501 bedrooms and extensive conference and banqueting facilities on a 3.8-acre site on the city’s south side.
The hotel is understood to have made profits of between €5 million and €6 million last year when the room occupancy rate was running at 70-75 per cent. A sizeable proportion of the profits come from the extensive banqueting hall, which can accommodate 1,500 guests.
Paul Collins, of CBRE Hotels, said yesterday there had been a remarkable recovery in the Dublin hotel market, and city hotels were now among the best-performing in Europe.
After buying the Burlington, Mr McNamara planned to boost the overall value of the site to €1 billion by developing a mainly office and retail complex extending to 33,300sq m. Shortly afterwards the property market bombed.
Hotel experts expect the Burlington will be of interest to the investment partners of several international hotel chains such as the Sheraton, Hilton, Hyatt, Marriott and Crowne Plaza. The major hotel groups seldom acquire hotels, preferring to manage them under their own brands for investment partners.
The €65-€75 million being sought for the Burlington equates to a valuation of about €130,000 to €150,000 per room. In the recent sale of the Morrison Hotel on Dublin’s Ormond Quay to a wealthy Russian businesswoman for €22 million, each of the 138 bedrooms cost just over €159,000.
One of the lowest valuations in recent years – €76,142 per room – was paid for the Four Seasons Hotel in Ballsbridge in June 2011. The sale to a private UK property company, London and Regional, for €15 million – a quarter of what the hotel cost to develop – reflected the fact that the then unprofitable Four Seasons had a long-term management agreement with the international company and the hotel pays an annual ground rent of €700,000 to the RDS.