Clonmel and South Tipperary property matters

Nama treating developers like dirt, says furious Agar - Independent.ie

2012-02-06T13:10:00.001Z

ONE of Ireland's top property developers has launched an unprecedented attack on the National Asset Management Agency (Nama) and accused the State's 'bad bank' of treating developers "like a piece of dirt on their shoe".
David Agar, who was behind the €340m Beacon Court scheme and Google's €75m state-of-the-art data centre, said he had decided to speak out because he believes "Nama will not be happy until every developer is banished from the country".
Mr Agar described himself as "emotionally frustrated" at the way in which the State agency is "driving developers into the ground".
The multi-millionaire property developer, against whom Nama has moved this week to take control of a "land-bank" development site with debts of €77m, said this weekend: "Nama is treating developers in a disgraceful manner.
"If they feel they are not capable of doing a good job, then why didn't they send in all the receivers on day one and have the show on the road by now?
"I am extremely frustrated and angry at how developers are being treated in this country. Nama will not be happy until every developer in this country is living in a three-bed semi-detached house and driving a Ford Cortina. And soon enough we will be able to pay for it out of our petty cash."
He went on: "Who are these people who thought we were experts at our jobs and now think we are a piece of dirt on their shoe? And how have the receivers suddenly become the new experts?
"I am emotionally frustrated at the way I have been treated. I have walked on water to prove a point to Nama and will continue to do so for the receiver.
"And I will continue to work with the receiver in every way possible while I am still in this country.
"But I predict that there will be no rise in the value of property in this country for at least 15 years.
"Nama is driving developers into the ground. It is sad to see such enterprising people being forced to go abroad for their skills to be appreciated, rather than encouraging them here, where they will be able to rebuild the country.
"Developers are being banished out of here in the name of the taxpayer. They are being forced and threatened into a state of silence but it is time to speak out. Nama will be proven to be the biggest mistake we ever made."
Nama has appointed Aiden Murphy, a partner at accountancy firm Horwath Bastow Charleton, as receiver over the assets of three companies linked to the developer: Dasnoc, Heratt and Sammark.
According to accounts filed with the Companies' Office, the firms have combined debts of around €77m following the purchase of greenfield development land in counties Dublin and Wicklow.
The land has not been developed, which means that realising value from the sites will be "slow and difficult", according to Mr Murphy.
Nama is understood to have become the main lender to the three firms after buying the debts from AIB, as part of the transfer of toxic debt to the State's bad bank.
Mr Agar was a major property player during the boom.
In addition to the sites now controlled by Nama, he was also behind the €340m Beacon Court scheme and the Profile Park industrial estate in south Dublin, home to Google's €75m state-of-the-art data centre.
He was also behind the single largest profit on a property development site in this country, bought from Bank Of Ireland for €13m and sold just 15 months later for €90m.
Unlike many of the new entrants who came unstuck through wildly speculative projects, Mr Agar had adopted a conservative business model and focussed on business and industrial park developments in the greater Dublin region.
Just before the economy hit the skids, he began to develop the hugely ambitious €1bn Profile Park business and trade park in Grangecastle in west Dublin. It is set to become Ireland's data cluster.
He was also instrumental in attracting investment from Google, with the search engine giant deciding to establish a €75m data centre in his South Dublin complex.
Major US technology group Digital Realty Trust is to expand its operations in Ireland at Agar's park. The move is seen as a collosal win for Ireland Inc, which is desperately trying to attract multinationals to these shores to help kickstart the economy and cut the lengthy dole queues.
Paying compliment to what he called "courageous" developers who he said have built "spectacular developments such as the Dundrum town centre and the Ritz Carlton Hotel, Mr Agar was keen to point out: "I have worked for free for three years for NAMA despite not having any personal guarantees on my loans."
- NIAMH HORAN and NICK WEBB

Now is the time to get training for a mortgage - Independent.ie

2012-02-06T13:07:00.001Z

House hunters who are planning to take advantage of the extra mortgage relief that's available for the next 11 months need to get in training. Like marathon runners they need to prepare months in advance and indeed in some cases almost a year in advance if they wish to convince a bank to give them a mortgage.
On the plus side they may have a slightly better chance of getting a mortgage this year as recently the two big Irish banks signalled plans to provide more mortgages to home buyers in 2012. The banks have also signalled that they are more likely to lend to those buying houses rather than flats and those buying homes rather than investors.
In 2011 as many as 13,000 mortgages are estimated to have been approved, of which first time buyers got about 6,500 mortgages and those moving houses got practically all of the remainder.
This year, with prices down by between 10 and 19pc over the last 12 months, there could be a further 1,300 mortgages available. If the banks devote more of their funds to mortgages, that figure could rise closer to 15,000 mortgages given out before the mortgage tax relief deadline closes next December.
But the prospect of increased availability is no reason for buyers to relax on their lifestyle training. According to mortgage advisor Michael Dowling, banks now scrutinise the spending and savings records of applicants for months prior to their application.
He has come across people who were refused mortgages even though they were borrowing less than 92pc of the value of the house and had their deposit saved up. However when the bank went over their credit card records they found that the applicant had missed a couple of payments over the previous 12 months. So the home hunter was refused the mortgage because the bank manager had a doubt over the applicant's ability to keep up the repayments.
So if you splashed out over the Christmas and haven't paid off the credit card bills then make sure that you do so as soon as possible. Any house hunter who is delaying payment with a view to splashing out again on Valentine's Day should think again. Not only do banks look at the bad credit record, but they can also scrutinise how mortgage applicants spend their money. A bit like Angela Merkel and her gang of three, the Irish banks also want to know that they are lending their money to someone who is willing to undergo a bit of sacrifice in order to make sure they can save money to repay the bank. In effect it's not even enough to keep out of the red but a buyer must be substantially in the black.
Gone too are the days when children who got a present of a house deposit from their parents could soft soap a bank manager into agreeing a mortgage of more than 92pc of the value of the house. Children must also show they have a record of saving consistently each month.
Banks may treat kindly those applicants who are paying rents on time and thus showing both the ability and the discipline to keep up the monthly repayments. So parents who are sheltering their kids from the perils of the rental market need to think again. Such parents are not doing them any favours if this means that the kids are spending a substantial portion of the their earnings on holidays and fast cars. So for some, spending on rent may not altogether be dead money after all if it teaches the kids the discipline of keeping up their monthly mortgage payments and other household outgoings. So parents may be doing them a double favour by charging them rent and putting it in a deposit account.
House hunters who are offered a new job with extra cash should also be wary of taking up the offer if they also want to buy a house this year. Dowling cites a person who was head hunted for a new job but found that the bank refused him a mortgage because he had been in the job only six months at the time of the application.
So if you are planning to buy before next December's tax deadline be sure to get those ducks in a row as soon as possible and visit a mortgage advisor to see what other bruises in your financial track record need a bit of toning.

Household Charge to be replaced with more equitable Property Tax in 2013/2014 « MerrionStreet.ie Irish Government News Service

2012-02-06T13:06:00.001Z

The Environment Minister Phil Hogan today announced the establishment of a high level and focused Inter-Departmental expert Group to consider the structures and modalities for an equitable valuation-based property tax that will replace the current €100 Household Charge.

Minister Hogan said:

Ireland is one of the last countries in Europe to introduce property-based charges to fund local services. The tax base in Ireland needs to be broadened but the focus must move away from taxing people’s work to lessen the impact on growth and to support employment.

The Minister stressed the Government’s firm commitment to introduce a valuation-based property tax to replace the Household Charge at the earliest opportunity. The group, which will be independently chaired by Dr. Don Thornhill and comprised of senior officials from relevant government departments, will report by the end of April.

The expert Group is to report to me on the design, scope and implementation of the property tax and I intend to bring proposals for an equitable valuation-based property tax to replace the Household Charge to Government as soon as possible thereafter.

The residential property tax is to:

·         Meet the immediate financial requirements of the EU/IMF programme;

·         Provide a stable funding base for the local authority sector in the medium and longer terms incorporating an appropriate element of local authority responsibility subject to any national parameters;

·         Ensure the maximum degree of fairness between and across both urban and rural areas;

·         Be collected centrally by the most cost efficient and effective means;

·         Facilitate easy and/or phased payments by households;

·         Be easily determined (e.g. on a self assessment basis), and having regard to the information currently available (or to be made available through registrations for the household charge) on residential property and/or house ownership details.

The Minister welcomed the fact that over 66,000 residential properties have registered for the Household Charge, equating to €6.6 million.

I would like to acknowledge and thank those people who have registered their properties and paid the Household Charge at this early stage. The large numbers of people paying the charge is a clear indication of compliance with the legislation and the acceptance that it is necessary to fund vital local services in our communities.

The €100 will go towards paying for essential local services: public parks; libraries; open spaces and leisure amenities; planning and development; fire and emergency services; maintenance and cleaning of streets and street lighting. These services are integral to the quality of life in local communities.

Click here for the full press release.

via merrionstreet.ie

Surveyors see some ground for optimism - The Irish Times

2012-02-06T13:05:00.001Z

LAURA SLATTERY
MORTGAGE FINANCE remained a stumbling block for home buyers, pressure on office rents continued and sales of retail premises were “dead in the water” in 2011, according to the annual property report by the Society of Chartered Surveyors.
However, the 319 chartered surveyors questioned for the report were optimistic about the Dublin residential property market, forecasting that prices would stabilise this year as a result of a dearth of new urban developments. The residential rental market had also “held its own”, with rents in certain parts of Dublin rising by between 5 and 7.5 per cent, the survey found.
Surveyors also reported healthy sales of agricultural land or development land for agricultural purposes in Leinster and Munster. Prime farm land in Tipperary and Kildare was sold for between €10,000 and €12,000 per acre last year, compared to a national average of €8,600 per acre.
The report highlights what it calls the “suburbanisation of retail”, whereby out-of-town shopping centres are performing better than town centres. Lettings in the retail sector increasingly tend to be short term – between two and three years – with tenants insisting on significantly lower rents, shorter lease terms, break clauses, rent-free periods and turnover-based rents.
Respondents believe that State assets agency Nama, which controls a number of hotels, still has “unrealistic asking prices” for those properties.
The power of Nama to “dictate and control” the property market was criticised in general, with some respondents believing it was preventing a normal market correction.

Minister announces group to examine new property tax | Irish Examiner

2012-02-06T13:04:00.001Z

The Environment Minister Phil Hogan has announced he has set up an expert group to consider the how the new property tax will be implemented.
The group will report back to Mr Hogan by the end of April this year.
It is expected the property tax will replace the €100 Household charge.
So far, 66,000 residential properties have registered to pay the new charge and approximately 1.6 million homeowners are liable for the fee.

via irishexaminer.com

Comers sell up German empire to fund buying spree at Nama - Independent.ie

2012-01-23T14:29:00.001Z

By Tom Lyons and Nick Webb

Sunday January 22 2012

Carroll assets eyed as brothers build up war chest
THE Comer brothers, the Galway developers who made a fortune in Britain, are selling part of their German property portfolio worth hundreds of millions in an audacious plan to capture a big chunk of the Irish apartment market.
The brothers left Ireland in the mid-Eighties and were repeatedly linked with a bid for football club Aston Villa in 2005, a move which the brothers later denied.
Monaco-based Luke Comer confirmed that the Comer Group, which he co-owns with his younger brother Brian, were looking at buying up portfolios of "several hundred" apartments in Dublin from Nama.
"We are looking at Ireland now because we've been out a long time -- 27 years -- and we'd be very interested if the price was right."
Mr Comer declined to comment on individual deals but he has, according to market sources, looked at acquiring part of apartment kingpin Liam Carroll's portfolio of several thousand apartments in the Dublin area.
"What we're looking at would be in the hundreds, I'd say. It all depends on the type that is available," Mr Comer said.
The Comer Group, he said, had cashed out most of its British investments in 2006 and reinvested the proceeds in Germany. It currently owns 28 retail centres in Germany, four hotels and a massive office block in Berlin called Die Pyramide.
"How much we invest in Ireland all depends on how much we offload in Germany," Mr Comer said, "The sales process is going pretty well."
"The German property market is high at the most so that's a reason to sell," he said.
"There is still a lot of downside in Ireland and maybe we wouldn't be interested if we weren't from here originally," he added, "but it will all depend on how much success we have in Germany before we can really assess Ireland."
Mr Comer confirmed he had met with Nama, which he described as "doing its best in very difficult circumstances".
Property market insiders linked the Comer brothers with being interested in several thousand apartments if Nama is prepared to sell them at a bulk discount.
Meanwhile it has emerged that banks are seeking control of a boom-time joint venture between busted developer Liam Carroll and semi-state Dublin Airport Authority (DAA), which has imploded over the repayment of a €34m loan from National Irish Bank.
The move will be extremely embarrassing for the DAA which borrowed millions with Mr Carroll to develop the Horizon business park near the airport. But when prices crashed and Mr Carroll's empire collapsed in 2009, the scheme got into difficulty.
Loans fell due last July and weren't paid off with an extension set to expire in nine days' time. Property sources have told the Sunday Independent that frantic talks between the semi-State, lenders and Mr Carroll's former business led to a deal framework being agreed last week.
It is understood that the DAA will exit the deal and transfer its shareholding to Mr Carroll's former company, Dunloe. The move will come as a major reputational blow for the semi-state, echoing the disastrous property dealings that sank fellow quango, Dublin Docklands Development Authority.
"The company is a joint venture between DAA and Dunloe. Its borrowings are non-recourse to DAA. DAA understands that Turckton is currently in talks in relation to refinancing its borrowings, and these talks are expected to be concluded shortly. Turckton has been a profitable investment for DAA, and DAA expects this to continue to be the case," said the DAA.

Review of negative-equity mortgages postponed - Independent.ie

2012-01-23T13:26:00.001Z

Monday January 23 2012

A REVIEW on the impact of so-called 'negative-equity mortgages' has been postponed until later this year because so few cases have come up, according to Finance Minister Michael Noonan.
A handful of banks began quietly allowing homeowners to shift their negative equity to a new property in the middle of last year, as first reported by the Irish Independent in September.
The progress of such lending is being carefully monitored by the Central Bank, which was due to assess the pros and cons of the loans by the end of 2011.
In response to a Dail question from Labour's Joanna Tuffy, Mr Noonan said only a "small number" of lenders had told the Central Bank they would consider offering such loans.
"The low level of activity made it difficult to conduct a meaningful review at the end of 2011," he added. "Therefore the proposed review will not take place until later this year."
October's Keane Report into the mortgage crisis alluded to the potential of negative-equity mortgages to help buyers trade down to cheaper properties.
This would lessen the monthly burden of their mortgages, though the 'loan to value' of the new loan would be worse.
The report also cautioned that banks "may want to use this as an opportunity to move people off tracker and reduced-rate mortgages".
"This would not be appropriate as in most cases it will defeat the objective of someone trading down to a more affordable mortgage," the report added.
Mr Noonan also used his response to once again rule out "a general scheme to assist mortgage holders in negative equity".
- Laura Noonan

Property windfall pensioners targeted by Revenue - Independent.ie

2012-01-23T13:25:00.001Z

PENSIONERS who come into property windfalls but fail to notify authorities are being targeted as part of a new benefits crackdown.
The probe, which was made possible as a result of increased sharing of data between the Department of Social Protection and the Revenue Commissioners, is part of a wider operation to identify benefits cheats.
The development comes in the wake of the furore over moves by the Revenue Commissioners to pursue 150,000 pensioners who may have underpaid tax.
The Irish Independent has learned that the department has carried out a new matching exercise using shared data.
Social protection officials are accessing the names of people on non-contributory pensions who paid capital acquisitions tax to the Revenue Commissioners on property they received from a family member.
People in receipt of welfare payments are required to report such property windfalls. This allows officials to reassess their payments in the light of their improved financial means.
Around one million tax records dating back to 2007 were examined as part of the probe, bringing to light 40,000 people who receive some form of social welfare payment.
Department officials began working their way through these cases in recent weeks and are at an early stage in the investigation.
So far, €386,634 has been saved by axing or reducing the social welfare benefits of people who failed to report their changed circumstances.
This is made up of €134,572 which was recovered directly from overpayments to the pensioners who failed to notify officials of the property income.
Another €252,062 was generated in 'control savings', which estimate the value of what would have been spent had these incidents not been uncovered.
A spokeswoman for the Department of Social Protection said: "In a small number of cases, the department has been notified of the property transfers which would have affected their payment rate.
"In those cases, their means were reassessed and claims reduced or terminated as appropriate."
The department is also using Revenue data to identify people receiving a one-parent family payment but who are actually living with a partner.
This had been made possible by obtaining data from Revenue of people getting mortgage interest relief.
This information is then compared with records of people receiving the one-parent family payment.
If two recipients are linked to the same mortgage, inspectors are able to investigate whether they are living apart, as they claim to be.
So far, concerns have been raised in about 850 cases and 90 of these are under review.
A spokesman said the "renewed focus" was due to improved computer systems.
Prosecutions will be considered in cases where a person has been working and claiming social welfare for 12 weeks or more, and the overpayment is higher than €2,000.
- Eilish O'Regan

Thomas Molloy: There's a notable change in behaviour on property - Independent.ie. Good study of buyer behaviour! Worth a read.

2012-01-23T12:32:00.001Z

Saturday January 21 2012

USER statistics for property websites are one way of measuring our obsession with bricks and mortar.
Around 450,000 people visit www.myhome.ie alone each month to gawk at its pages.
Rival websites claim even bigger audiences at a time when only 2,000 houses a month are actually being sold.
Those surfing habits speak volumes about the pent-up demand that exists in the property market these days following a gut-wrenching property crash that forced hundreds of thousands to put their dreams on hold.
While there are many rational reasons to hold off buying a new home, behavioural economists have found compelling evidence of much deeper forces at work in our subconscious that are far from rational. These forces often make us fearful of trading up or moving sideways.
A property crash is, after all, one of the best times for families to ditch their small homes and move into something bigger.
The 50pc declines we have seen in the past few years mean that somebody living in a €250,000 house who had their eye on a €500,000 house back in 2007 now requires just €125,000 to get that house today, compared to €250,000 back in 2007.
The snag for many is that while they can easily accept the new value of their dream house down the road, they just can't bring themselves to admit that their own house is also worth half what they paid for it despite all the work they put into it.
The reason for this is that most humans suffer from what economists call "loss aversion".
The term comes from behavioural economics, which is a relatively new field within economics that attempts to explain why people act the way they do when it makes little sense. Risking your life to save a stranger, for example, cannot be explained by most economic models that assume we all pursue our own self-interest.
A series of relatively simple experiments carried out in the 1970s and 1980s proves quite convincingly that we have an irrational hatred of losing money. The economists found that most people will refuse if somebody offers to flip a coin and give you €10 if it lands on heads and take €10 from you if it lands on tails.
They will also refuse a deal if the offer rises to €15 for heads and €10 for tails. In fact, the research shows that an average person demands odds of two-to-one before they take the risk.
This led the researchers who first identified this trait in the mid-1970s to conclude that the pain of a loss is about twice as potent as the pleasure generated by a gain.
Christopher Mayer, another behavioural economist, used this as the basis for his research into why the property market operates so differently in practice to economic theory.
Mr Mayer summed up his conclusions by saying: "Economists tend to think people are crazy because they won't sell their houses for less than they paid for them -- and people think economists are crazy for thinking things like that."
His conclusions followed a study of a three-year slide in the Boston property market in the early 1990s, which pushed down prices by almost 40pc. The study showed that people who bought at the peak of that property boom demanded 35pc more for apartments than people who had bought identical apartments after the collapse because those who bought at the peak simply could not bear to take a loss.
Professionals who trade all day have learnt to overcome loss aversion. Good traders shrug and say to themselves that a tonne of coffee, a house or a bushel of grain is worth whatever the market will pay. The trader wants to know how much a pork belly costs today and what it can be sold for in a week's time. The past is over.
Writing about the Boston market, Prof Mayer concluded that "people who had bought at the peak and were facing a loss generally listed their properties for significantly more than those who had bought at a time when prices were lower. Properties listed above the market price just sat there... much of the market went into a deep freeze as many people held out for market prices that no one would reasonably pay".
He could have been describing post-Tiger Ireland.
Many people "trapped" in houses today will have to develop a similar attitude if the market here is ever to recover. How this can be done is another matter, although you could do worse than listen to the advice the professor gave his own family.
"If you want to sell your house then you list it at the market price and you sell it," he said.
"If you don't really want to sell then don't put it on the market. But don't say you want to sell and then set the price so high that you spend the year cleaning up every morning, having people walk through your living room and look in your medicine cabinets and reject you. That's just painful and expensive."
Assuming you do want to sell your home, what other advice do economists have to offer? Chris Janiszewski and Dan Uy, who looked at five years of home sales in Alachuan County in Florida, have concluded that quoting a precise price gets you a higher price.
The researchers found that sellers who listed their homes with $100 endings got closer offers than those who listed homes with $1,000 endings, who got closer offers than those with $10,000 endings.
Another tactic (from Australia) is even stranger; list a house with two prices. Down Under, sellers often give a minimum and a maximum asking price. Researchers suggest that two prices confuse those making a bid and leaves them wondering where they should make a bid along the spectrum.
The belief that this works is based on a 1995 experiment by Max Bazerman, Sally Blount White and George Loewenstein that has volunteers playing a simple bargaining simulation which shows people were more likely to accept a given price when it was presented with a second, less advantageous offer.
In other words, they rejected an offer of $3, when it was the only offer on the table, but accepted $3, when the choices were $2, $3 or no deal.
Behavioural economics has limitations (and is still unable to explain why we fall in love) but there are many lessons for the hundreds of thousands of people who log on to property website every month to check out houses.

Three-track approach could ease mortgage nightmare - The Irish Times - Mon, Jan 23, 2012

2012-01-23T12:25:00.001Z

ANALYSIS: THE COMPLEX issue of how to deal with unsustainable mortgages in out-of-court debt settlements may be concluded in three months’ time – but the operation of the new system could prove as difficult as its construction.
As part of the latest quarterly review of the bailout programme, the Government last week said it was deferring publication of the personal insolvency legislation until the end of April.
The delay of several weeks was due to the “very difficult” technical nature of the legislation, Minister for Finance Michael Noonan said last week.
The growing number of Irish individuals travelling to declare bankruptcy in the UK – where bankrupts can walk free of debt after a year – makes the need to reform Irish personal insolvency all the more urgent.
Last year the Government reduced the term for the discharge of a bankrupt from 12 years to five years in certain circumstances. This may again be reduced to three under the new legislation.
Under the proposed changes, the Government aims to introduce non-judicial debt settlements, allowing people an alternative to the costly and protracted court system of resolving debts.
But the changes are fraught with difficulties. If the reforms make debt settlement too lenient and include mortgage debt write-offs, it could encourage borrowers who can afford their mortgages to plead an inability to pay in an effort to secure the deals that will be on offer to the “can’t pay” category.
That could see the capital hit to the banks increase the bank bailouts beyond the €62 billion cost of recapitalisations so far.
If bankruptcy remains too onerous and the new out-of-court settlement system does not go far enough, the overhang of personal debt will remain a major drag on economic recovery.
Government officials are said to want to limit write-offs in out-of-court debt settlements to unsecured debt such as car loans, credit card debt and personal overdrafts, and to ensure mortgage debt is only restructured by pushing out the term of the loans.
Such a plan would involve reduced mortgage payments or a mortgage holiday over a period to allow some write-off of unsecured debt during that period. But mortgage debt would not be written off – it would merely be repaid at a later date.
The Irish Banking Federation said last week that lenders wanted the personal insolvency regime limited to unsecured debt.
The representative group said it would lobby the Government to ensure that, if secured debt is included, it will be “done in a way which will minimise the capital impact on balance sheets”.
While the Government hammers out the legislative changes, the banks are not sitting back. AIB recently agreed a deal with Certus – the firm that is managing the run-down of the former Bank of Scotland (Ireland) loan book for the part-nationalised UK bank Lloyds – to help the State-controlled Irish bank devise ways to deal with distressed borrowers.
Certus is managing about €8.5 billion of former Halifax mortgages written in the Irish market.
The company has devised alternative approaches to the limited twin-track options available to lenders – forbearance or foreclosure. The latter option is rarely used relative to the number of mortgages in default, as the cost to the banks is prohibitive given how far property prices have fallen.
About 13 per cent of residential mortgages are in arrears of 90 days or more, or have been restructured to ease the burden on borrowers. This figure is rising.
The number of possession orders on properties granted by the High Court to lenders actually declined in 2011, according to figures obtained by The Irish Times (This does not include repossessions in the Circuit Court).
From the perspective of the banks, it is more commercially viable to keep a distressed borrower in their home and repaying at least some debt than repossessing a house that cannot be sold and costs money to maintain.
“Banks are rarely the best people to sell houses – they typically incur a 30 per cent discount relative to the price index,” said Certus chief executive Joe Higgins, who was previously in charge of Bank of Scotland (Ireland).
“In many cases customers are in the right house, but have the wrong mortgage. They can afford the house they’re in at today’s rental values, but they can’t afford the mortgage they took out to buy it in the boom. In these circumstances, repossession is the wrong answer for both the customer and the bank.”
Higgins and his team at Certus have crunched the forecast numbers underlying the Central Bank’s stress tests figures last year and have charted different routes to avoid the road to repossession.
Seizing control of property means selling houses into the bottom of the housing market. Based on the unemployment estimates for the coming years in the tests, Certus estimates that of the people out of work today more than 50 per cent are likely to be back in work within five years.
The company believes that, for customers in distress, banks should be setting mortgages at an affordable level based on the likely future earnings of a borrower.
Where the bank establishes that the customer is likely to have more than enough income to be able to repay their mortgage from future earnings over time, the borrower should be shown forbearance.
This would involve reduced monthly repayments by extending the term of the mortgage.
If the mortgage that the borrower can afford – again based on likely future earnings – is higher than the potential disposal value of the property, but lower than the existing mortgage, the bank should leave the customer in the property and forgive part of the mortgage down to the level they can afford.
Certus believes that, in these circumstances, the bank is better off accepting reduced mortgage repayments than repossessing.
If the mortgage the borrower can afford is lower than the potential disposal value of the property, then the bank must foreclose – either by repossessing the property or encouraging the borrower to move to a smaller home using a mortgage they can afford.
This three-track approach of forbear, forgive or foreclose is based on the current rental value of the properties.
If a borrower can afford to lease their home based on the property’s rental value and the person’s likely future earnings, they are in the right house but have the wrong mortgage, says Certus. The firm believes adopting this approach could save the banks capital.
The Central Bank’s stress tests, which were verified by consultants BlackRock, estimated that Bank of Ireland, AIB, Permanent TSB and EBS faced expected losses of €5.8 billion over the lifetime of their residential mortgages.
Applying its more advanced forbearance solutions, Certus believes that it can reduce this to €2.9 billion, as the stress tests were based only on foreclosures.
The firm’s approach will only work if the borrowers agree to co-operate through the forbearance period and if the banks can independently verify income through the receipt of tax returns.
The proposed new credit register, which will give lenders a full up-to-date picture of a borrower’s total debts across all credit institutions, will help to assess what mortgage a borrower can afford.
The new personal insolvency regime will also need to prevent “gaming” by borrowers, or moral hazard – where risky behaviour is rewarded.
Such disclosure is required as borrowers could conceal income in an attempt to force the banks to agree to forgive some of the debt.
This will give lenders a stick to force borrowers into out-of-court settlements that will limit their access to credit should agreed debt forbearance and forgiveness arrangements start to fall apart.
Certus says the proposed measures would only be open to banks to apply to customers, and not for borrowers themselves to choose. For this reason, the banks could not advertise the proposals or discuss them openly – again to prevent “gaming” by customers. They must be applied case-by-case.
This is the track recommended by the Government’s expert group led by accountant Declan Keane, which sought to find a solution to growing mortgage arrears.
It found that people have been entering forbearance arrangements with lenders or “sheltering” behind the moratorium on legal action or the slow legal process when, in reality, they will never be able to afford their mortgages.
Introducing alternatives beyond forbearance, or the less-frequently used foreclosure, will allow banks break the logjam of problem mortgages for which no long-term or viable solution has been agreed.
The move by Certus to help manage loans at a second bank means the company’s proposed options could eventually be made available to distressed borrowers within a book of €26 billion mortgages at AIB and a further €15 billion at its subsidiary, EBS.
“Banks will need to think more creatively in Ireland’s unprecedented circumstances,” said Joe Higgins of Certus.
“Long-term forbearance tools and debt forgiveness will be more important remedies than the traditional repossession route.”
THE THREE Fs: BANK SCENARIOS FOR TROUBLED MORTGAGES
1 FORBEAR
Where the borrower can ultimately afford the mortgage from their likely future earnings
PLAN: bear with the borrower and reduce the payments for a short time by extending the term of the loan
2 FORGIVE
Where the borrower can afford only some of the mortgage based on their likely future earnings and the mortgage is higher than the potential disposal value of the property
PLAN: reduce the mortgage by forgiving part of it and leave the borrower in possession of the property
3 FORECLOSE
Where the borrower will never be able to afford the mortgage and the mortgage is lower than the disposal value of the property
PLAN: borrower must agree to sell the property and move to a smaller house – or the lender will repossess the property

Nama denies supporting Quinlan’s plush lifestyle | Irish Examiner

2012-01-23T12:24:00.001Z

By Paul O’Brien and Conor Ryan
Monday, January 23, 2012
Nama has said it is not contributing to the plush lifestyle of the stricken developer Dermot Quinlan.
The tax inspector turned development tycoon has seen his empire subjected to receivership proceedings by Nama and the agency has begun enforcement proceedings against him.
However, he has reportedly relocated to a €4,000-a-week home in a rich London neighbourhood and retained the trappings of wealth.
A Nama spokesman said the money Mr Quinlan was living on was not provided or sanctioned by the agency and it was not working with him.
"Clearly we have begun appointing receivers, we have begun enforcement proceedings and we are not supporting his lifestyle in any way," the spokesman said.
Mr Quinlan is not one of approximately 40 developers allowed draw down a salary from their business as they work with Nama to maximise the potential return.
In this respect, Finance Minister Michael Noonan said he will not direct Nama to lower the €200,000 salaries sanctioned for two of those developers as it would be "inappropriate".
Nama confirmed in recent months that it authorised salaries of €200,000 — the same as that of the taoiseach — for two developers whose loans are with the agency.
The average payment for the 40 developers is €75,000 a year.
Despite demands for the Government to intervene to lower the salaries, Mr Noonan has repeatedly made clear his reluctance to do so. Asked again about the issue by fellow Fine Gael TD Terence Flanagan, Mr Noonan said the salaries were a commercial decision taken by Nama and that it would be inappropriate for him to intervene.
"Both the chairman of Nama and I have separately explained on several occasions over the past few months that Nama decides whether or not to work with any particular debtor on the basis of what will generate the maximum return for the taxpayer," Mr Noonan said.
"Nama only works with developers where it considers that this will provide the best return to the taxpayer. Nama will continue to make its decisions on a case-by-case basis in line with its commercial mandate."
Mr Noonan said he understood from Nama that as part of the agency’s business plan agreements with debtors, it normally sought a reduction of 50% to 75% in overhead costs and that any salaries paid to debtors were from these reduced budgets.
Mr Noonan said: "Nama has been established as a fully commercial agency to operate under the direction of a board of directors. As long as Nama operates in accordance with statute, it would be inappropriate for me or my officials to attempt to interfere with the commercial decisions taken by the board.
"On the basis of the information received from Nama, I am satisfied that the agency is acting appropriately in this matter and seeking to protect taxpayers’ interests."
The developers in question have "multi-billion-euro portfolios", according to Nama, and the agency believes it is cheaper to the taxpayer to allow these individuals continue to manage the portfolios rather than hire outside asset managers.

Wallace faces sell-off after move by bank - The Irish Times - Mon, Jan 23, 2012

2012-01-23T12:23:00.001Z

INDEPENDENT TD Mick Wallace is facing the sell-off of his property empire after ACC Bank obtained judgment mortgages on 23 of his properties.
The bank successfully registered judgment mortgages at the Registry of Deeds and the Property Registration Authority against Mr Wallace and his construction company, MJ Wallace, just before Christmas.
The move gives effect to the summary judgment orders for €19 million which the bank secured against Mr Wallace and his company last October.
The properties affected include his home address in Clontarf, Dublin, as well as houses, apartments and commercial premises across the city.
A judgment mortgage effectively prohibits any dealings on a property unless the debt involved is discharged.
ACC Bank could force the sale of Mr Wallace’s properties, but would first have to apply to the courts to order this to happen.
The bank could also seek to have the TD declared a bankrupt for non-payment of his debts – a move that would force him to resign his seat.
Mr Wallace, who has total debts exceeding €40 million, told The Irish Times at the weekend that he swore a statement for the bank last week setting out all he and his company owned.
He said he had no idea what the bank now intended to do or whether it would take bankruptcy proceedings.
The bank appointed a receiver in May 2011 but Mr Wallace said this applied to the assets of his company and not the company itself. He said that although the company was still trading and employing a few staff, it was effectively “finished”.
Since the judgment against the company, it has struggled to find good work. He said he would not be able to repay his debts because the value of his assets had greatly diminished.
The other banks to which he owed money – which include AIB, Bank of Scotland (Ireland) and Ulster Bank – had so far not followed the example of ACC by pursuing him in the courts, and he still had a good working relationship with them.
Another of his companies, Wallace Calcio, was still operating normally and employing “more than 50 people” in wine bars and other businesses, he stressed.
Mr Wallace criticised some of the press coverage of his business difficulties, saying the impression had been given last year that he had not or would not pay staff pension contributions to the Construction Workers’ Pension Fund.
He said €136,000 was owed in the case, but the outstanding amount was €24,000 at the time of the summons and all outstanding monies had been paid by the time of the court case.
“I was fined [€7,000} for late payment. At no stage did I not intend to pay this money.”

Trend for saving continued in 2011 - The Irish Times - Sat, Jan 14, 2012

2012-01-16T14:50:00.001Z

DAN O'BRIEN, Economics Editor
HOUSEHOLDS HAVE continued to save a large proportion of their incomes in the third quarter of 2011, according to new figures published by the Central Statistics Office.
Gross saving by households stood at €3.9 billion during the three-month period, or 17.3 per cent of their aggregate incomes.
This is broadly in line with amounts saved since the recession began but marks a continuation of the slight downward trend in evidence for almost three years.
Before the recession began, households saved much less and instead consumed a larger proportion of their incomes. Much of the increase in household savings is being used to pay down debt.
As the chart below shows, a gap has opened up between the disposable income of households and the amount they spend. Although both have declined since the bursting of the property bubble, spending has fallen by considerably more than incomes, as households save more.
In the third quarter of 2011, the aggregate gross disposable income of households was 16 per cent lower than the all-time peak, reached in early 2008.
Total quarterly spending by all households fell by more than 24 per cent between the third quarter of 2011 and the record high, reached at the end of 2007.
The figures are not adjusted for inflation or seasonality. As incomes are lower in the final quarter of each year (as tax payments fall due) and spending is higher (owing to Christmas), the unadjusted figures are volatile.

Groupthink: Homes landed for €85k each | Irish Examiner

2012-01-16T14:35:00.001Z

By Tommy Barker, Property Editor
Saturday, January 14, 2012
A GROUP of individuals have banded together to get the deal of a lifetime, snapping up 14 upscale holiday homes in receivership for €85,000 each — less than one-third of the original price.
And the success of having 14 sales simultaneously go through on a "back-to-back" basis can be a precedent for some other distressed house schemes, it has been claimed.
The purpose-built holiday homes at Mountain View, Glengarriff, in West Cork, along with a leisure centre to be run by a co-op, have been bought collectively by private cash buyers, who range in age from their 30s to their 70s.
They each paid around €85,000 for the three-bed, four-star, rental-quality houses, which had idled in receivership for two years. Mountain View was built by a Limerick partnership, who had hoped to sell them with the aid of tax breaks for around €300,000 each.
Now they have just been insured by their new owners for a rebuild cost of about €150,000 each.
The disparate group came together in August 2011 when local, part-time resident and legally-savvy businessman Finn McSweeney decided: "I didn’t want a ghost estate on my doorstep."
He met with estate agent John O’Neill of REA Celtic Properties, and between them they targeted dozens of people who had links to Glengarriff, including regular holiday-makers, golfers, families in mobile home parks, and public and civil servants retiring with cash lump sums.
All 14 buyers moved in tandem on contracts, as well as putting about €200,000 into a fund to get all the houses (averaging 1,200 sq ft) to the same finished standard. There was a list of at least six other potential buyers if anyone pulled out.
"There was a huge element of trust in auctioneer John O’Neill, and the group’s leader, Finn McSweeney — that was the key," said receiver Richard Maguire of O’Donovan Caulfield Lavin, acting for Anglo Irish Bank.
"Every one of the 14 houses had lights blazing on New Year’s Eve. Instead of being a ghost or famine village, there’s been a real gain for the community."

Sean Dunne: 'Au revoir. My D4 dream is dead' - National News - Independent.ie

2012-01-16T14:33:00.001Z

SEAN Dunne has confirmed that his dream of bringing a piece of Knightsbridge to Ballsbridge has finally come to an end.
Speaking exclusively to the Sunday Independent at the D4 Berkeley Hotel yesterday, the Carlow-born developer said he was at "an advanced stage in agreeing an exit strategy that is consensual with the syndicate of banks" that backed the multi-million euro scheme. He said he was looking forward to moving on with his life in America.
Asked how relations with the banks who had lent him a massive €379m for the former Jurys hotels were now that he was leaving them behind, a relaxed Mr Dunne said: "In the strange times we're now living in, it's very important to maintain good relations with your banks. The syndicate have been very supportive of me."
Not even the mention of Nama and its decision to seek a multi-million euro judgement against him in the High Court appeared to ruffle the man the media once dubbed the Baron of Ballsbridge.
Mr Dunne even went so far as to point out that Nama was looking for a judgement of €184m against him, as opposed to the sum of €100m quoted in the media. While he declined to comment further on the matter, the Sunday Independent understands that he has written to Nama to inform it of his intention to consent to the judgement subject to the figures being verified by his own accountants.
When asked to confirm the extent of the personal guarantees he had given to the banks for his loans on the former Jurys Ballsbridge site, Mr Dunne said these amounted to a €50m guarantee to Ulster Bank, €25m to ACC and €25m to Rabobank. He stressed, however, that he had lost all of the €125m that he had invested personally in the proposed redevelopment of the site.
Mr Dunne went on to note that he had given personal guarantees totalling €409m during the heady years of the boom, once the €184m Nama intended to pursue was added to the overall guarantees of €125m and €100m he had given to the Ulster Bank (and another bank which he did not identify).
Asked for his views on the personal guarantees the banks had sought from their clients during the Celtic Tiger, Mr Dunne said: "They [personal guarantees] should be banned from all future lending. On a personal level, the next banker who asks me for a personal guarantee had better be sitting safely beyond arm's reach."
The Sunday Independent understands that former Jurys Doyle group chief executive Pat McCann, who now heads the Maldron Group, is being lined up to oversee the operations of the Ballsbridge hotels on behalf of the syndicate.
Mr Dunne is understood to be in negotiations with a number of hotels in the Ballsbridge area with a view to offering them marketing and room sales services, through a D4 Hotels website.

Parlon hits out at 'wild allegations' on pensions - National News - Independent.ie

2012-01-16T14:31:00.001Z

A SERIOUS row that erupted at a meeting of the board of the Construction Industry Federation (CIF) last week was related to the administration of the employers' body's pension scheme, the Sunday Independent has learned.
After the meeting, the CIF's director general, Tom Parlon, wrote to board member Jerry Beades to accuse him of making "wild allegations without foundation".
Mr Parlon added that this was now "unfortunately" a "recurring theme" of Mr Beades' contributions to meeting, something which, he said, was "totally unwarranted and unacceptable".
However, Mr Beades, in a reply to Mr Parlon, called for the resignation of certain named individuals whom he accused of being "deliberately misleading" in relation to facts and of "attempting to discredit me personally" by implying that he had been supplied with financial information.
Mr Beades first raised questions in relation to the administration of the CIF's pension scheme last May.
He has since repeatedly sought detailed information specifically in relation to around €30m which, he claims, is controlled by senior CIF and trade union officials "unknown to the membership of the CIF and employees" who make contributions.
He is accusing the CIF of a "blatant disregard" for "safe accounting" and is calling on the Pensions Ombudsman to conduct an investigation.
However, Mr Parlon has told Mr Beades that his contribution to an executive meeting on Tuesday last "showed a total lack of respect" for the chair of the meeting, the integrity of the officers of the CIF and the private business affairs of individual members.
He said Mr Bades was "fully entitled" to raise issues and "make inquiries" but that this must be done in an "appropriate manner".
Mr Parlon said members of the executive body should expect to attend and discuss key issues "without being shouted down in repeated outbursts" and demanded that meetings be held in a "courteous and businesslike" manner.
He asked that Mr Beades undertake in writing that he conduct himself in a "professional and civil manner" at further meetings and that he "apologise in writing" to fellow members for his behaviour at the meeting last week.
The row flared up after a presentation of a review of the Construction Industry Monitoring Agency (CIMA), the role of which is, among other things, to ensure pension scheme compliance.
Mr Beades maintains that there is a lot of disquiet in the industry in relation to the administration of the pension scheme. He claims that large sums have been collected which are not used for pension-contribution purposes.
The meeting last week heard that a review of the functions and operations of CIMA had not been conducted for approximately a decade.
"Regular reviews of the agency must be conducted to ensure its continued effectiveness and viability," CIMA's own review concluded.
It also stated: "Allegations have recently been made of CIMA monitors pursuing other industrial-relations type issues in addition to compliance with the Pension and Sick Pay Scheme.
"We recommend that the monitor-nomination form and the monitor-declaration form be strictly adhered to. The activities of CIMA monitors should be keenly supervised and any deviation into other industrial relations issues by CIMA monitors should be dealt with by the code of practice drawn up for such issues.
"At present contributions to CIMA are on a voluntary basis. We recommend that the executive body give consideration to making these mandatory."
- JODY CORCORAN

Estate agent in Ponzi land scheme jailed for six years - The Irish Times - Fri, Jan 13, 2012

2012-01-16T13:50:00.001Z

A FORMER estate agent who stole €1.6 million after he used solicitor Gerald Kean’s name to encourage 25 investors to participate in a Ponzi scheme has been jailed for six years.
Eamonn Kelly, who had owned two RE/MAX auctioneers franchises, told investors they could make €15,000 profit on a €50,000 investment within six months if they bought sites he claimed he had identified in the UK.
He said the sites were incredibly lucrative and that planning permission for a hotel was imminent. He subsequently used funds from later investors to repay profits to the early investors to encourage them to reinvest.
Kelly (48), Decies Road, Ballyfermot, pleaded guilty at Dublin Circuit Criminal Court yesterday to sample charges of theft, one of producing a false instrument and one of forgery between October 2007 and February 2010. He has no previous convictions.
Det Garda Séamus Padden told Kerida Naidoo, prosecuting, that Kelly forged Mr Kean’s signature on a letter sent to potential investors to encourage them to invest in a bogus property operation in Manchester. The letter stated that the solicitor was representing Kelly and that the estate agent acted as an adviser to Mr Kean. Mr Kean knew nothing about the letter.
Kelly also provided potential investors with a bogus letter from the Ulster Bank in Crumlin, stating that he had €4.6 million on deposit in an account there.
Det Garda Padden said the scheme involved 25 groups from Dublin, Wexford and Donegal, whose investments ranged from €10,000 to €100,000. Kelly told the investors that the sites could be purchased at cut-price and hotels could then be built on them which would in turn produce a significant short-term profit.
Det Garda Padden told Mr Naidoo that the investors represented a “cross-section of society”, some of whom used their recent redundancy to purchase the site, others used their savings, while others were “business people who would have the means to survive” despite their financial loss.
Kelly had paid commission to RE/MAX agents in both Donegal and Wexford to source potential investors but gardaí accept that these estate agents genuinely believed the operation was legitimate. He found Dublin investors through his contacts with his local GAA club in Crumlin, through friends and acquaintances.
Det Garda Padden said the bulk of the funds, just over €1 million, came from the Donegal investors.
He said Kelly had paid back €410,000 to a small number of investors before he was caught and €480,000, he then held in three different bank accounts, was frozen by order of the High Court upon his arrest.
Det Garda Padden told Mr Naidoo that the scheme came to light after the bogus letter from Ulster Bank came to the attention of the bank. They contacted the Garda, Kelly’s accounts were frozen and he then presented himself voluntarily at the Garda station.
He made full admissions and said he had started the scheme after he ran into financial difficulty following the property crash. He said he was under pressure to keep up to date with his €8,000 monthly mortgage repayments on properties in Kildare, Dublin and Portugal.
Judge Martin Nolan described the offence as a “classic Ponzi scheme”. He said Kelly had been a decent man until he engaged in this activity and found himself “totally out of his depth”. Kelly’s crime “involved deception, severe losses to some and breaches of trust”. He imposed consecutive sentences totalling six years.
The case was adjourned to allow the State time to consider what should be done with the money frozen in Kelly’s account.

Bank entitled to judgments of €2.1m over loans on properties - The Irish Times - Sat, Jan 14, 2012

2012-01-16T13:38:00.001Z

A bank is entitled to summary judgment orders against a barrister and his wife for €2.1 million over loans on six rental properties on which they defaulted, a High Court judge has ruled. Permanent TSB brought the claim against Ronald Hudson and his wife Miriam arising out of their purchase in 2003 of three houses in Clondalkin, Dublin, an apartment in Galway and a further two houses in 2006.
They were given five loans totalling some €1.97 million. After falling into arrears the bank demanded full repayment. They now owe €2.1 million.
The Hudsons said they had a defence including that on the basis of representations made to them by mortgage broker Susan Croke, of the Irish Mortgage Corporation, they would not be personally liable for the loans and could simply hand back the properties to the bank if things did not work out. Mr Justice Seán Ryan yesterday said he found the story told by Mr Hudson and his accountant Anthony Fitzpatrick was not credible. “It is far-fetched and inconsistent,” he said

Figures show serious decline in pubs and off-licences | Irish Examiner

2012-01-16T13:29:00.003Z

RURAL pubs and off-licences across the country are in serious decline, new figures reveal.
One in ten pubs ceased trading since 2007 — with drink driving laws being blamed for the closures.
Since the start of the recession, more than 800 pubs have closed with rural counties being worst affected, figures released by the Revenue Commissioners show.
In 2007, 8,318 applications for renewed pub licences were granted, however, as of last year that figure dropped to 7,509.
Junior Minister for Tourism and Sport Michael Ring claims recent drink driving legislation is having a detrimental effect on the rural pub sector and a knock-on effect on tourism.
"There is no doubt that it is a rural problem and that is shown in the figures. Recent drink driving regulations probably haven’t helped the situation either. It is an inherent part of our culture and it is extremely sad to see the decline," Mr Ring said.
Cork is the worst effected county with over 146 pubs having closed, a rate of 12% in four years. However, this can be attributed to Cork’s large number of pubs, currently at 1,010 — 249 more than Dublin.
Louth, Laois, Leitrim and Donegal’s pub sector are also badly affected, while Waterford’s off-licence business has been slashed in half since 2007.
The capital is one of the least affected areas with a 4% drop in pub applications.
Padraig Cribben, president of the Vintners Federation of Ireland, said lifestyle changes, increased costs and low-cost alcohol in supermarkets were to blame for the decline.
"In the last 12 months, 7,000 jobs were lost in the on-trade sector alone and at least 500 pubs are at risk of closing over the next 12 months, with the subsequent loss of a further 4,000 jobs," Mr Cibben said.
"The Government needs to sit up and take stock of what is happening here.
"We are a major asset to this economy and all we are looking for is a level playing field," Mr Cribben added.
Restaurants have also fared poorly as the number of licence renewals fell by 20%.
The pub remains the number one attraction for visitors coming to Ireland, according to the latest Lonely Planet guide published just last week.

Landlords hit as rent welfare cut - Independent.ie

2012-01-16T13:29:00.001Z

LANDLORDS renting their property out to welfare recipients will take a hit of as much as €270 a month as the Government cuts rent supplements in a bid to save €22m from its annual €500m welfare rent bill, writes Fiach Kelly.
Rent supplement is paid to people living in private rented accommodation whose only income is a social welfare payment, such as the dole.
A review by the Social Protection Department found the State was helping to foot rental bills to landlords around the country way in excess of market value, mostly outside Dublin.
New limits based on local market rates come into effect from this month for all new claimants.
The Department of Social Protection will write to existing recipients of rent allowance informing them of the new limits for their area as their lease comes up for renewal.
If their landlord refuses to accept the lower rate, the renter will be told to find alternative, cheaper accommodation.

Few Nama fire sales likely in short term, says investor - The Irish Times - Mon, Jan 16, 2012

2012-01-16T13:28:00.001Z

STATE ASSETS agency Nama’s determination not to sell properties below the value at which it acquired them is likely to result in few distressed asset sales over the short term, according to one investor.
Nama has made it clear that it will not embark on fire sales of properties that it controls in the Republic, nor is it prepared to sell assets for less than what it paid to acquire them in the first place.
Justin Bickle, managing director of the UK division of US investment fund Oaktree Capital, says that, as values fall in both the Republic and across the euro zone, maintaining this discipline will be important for Nama.
But, he says, the approach is likely to “result in less transactions for distressed assets purchasers in the short term”.
Oaktree Capital backed house builder McInerney Holdings examinership and was poised to invest up to €48 million in paying its creditors and providing it with working capital had it successfully emerged from the process. However, the courts refused to approve a rescue plan for the group. Writing in Kavanagh Fennell’s Corporate Restructuring and Insolvency Review for 2011 , which was published at the weekend, Mr Bickle points out that, from the perspective of anyone interested in buying or investing in distressed assets, Nama controls much of the market.
He points out that Nama’s influence is important, even when investors are looking at buying assets from banks outside the agency’s remit, as how it manages and sells its properties will have an impact on the overall market.

Is now a good time to buy? - The Irish Times - Mon, Jan 09, 2012

2012-01-09T16:18:00.001Z

It’s the question no one can answer with cast-iron certainty but with serious mortgage relief on offer and falling prices, it might just be a good time to buy, writes CONOR POPE
WHILE THE three auctions of distressed properties held by Space Allsop in the Shelbourne Hotel last year featured dozens of lots and attracted huge crowds, protesters, international television crews and crowd-controlling gardaí, the Merlin property auction in the Burlington Hotel at the end of November was a considerably more low-key affair.
There were just 60 chairs in the ballroom and many of those remained vacant throughout the short auction. Just two of 10 properties reached their reserve price and sold under the hammer, a further two properties were sold after the auction and negotiations got underway for three others.
Unlike the Space Allsop affairs which were organised by banks anxious to get repossessed or surrendered properties off their hands, the Merlin sale saw owners putting their houses on the market and the anxiety on the faces of many of those would-be sellers was evident.
While the auctions were different, they were both a stark reminder of just how far the Irish property market has fallen.
In the Burlington, one house in Dublin’s East Wall that once might have been expected to sell for close to €400,000, had a reserve of €65,000 which it eventually reached after a painstaking process. A three-bedroom house in Clifden, Co Galway had a reserve of €69,000 but bidding peaked at €58,000. Its value just two years ago was put at €205,000. A two-bedroom apartment in Youghal, Co Cork attracted a bid of €65,000 before selling, post-auction, for €66,500. Its peak value was around €250,000.
Recent figures from the Central Statistics Office (CSO), MyHome.ie and Daft.ie all bear out the precipitous decline. According to the CSO, the cost of an average home in the Republic fell by almost 16 per cent in the year to the end of November. For its part, MyHome.ie reported an annual rate of decline of 13 per cent in 2011, while Daft said house prices had fallen by 18 per cent year-on-year.
Then there are the more than 100,000 homeowners who are struggling and often failing to pay their mortgages each month. In such a climate of fear and uncertainty asking whether 2012 might be the year to buy may sound ridiculous but it might be a good idea for many.
In an effort to kick-start the moribund property market, in last month’s Budget the Minister for Finance Michael Noonan dangled a carrot in front of would-be buyers who are considering making a move.
First-time buyers who buy this year will get mortgage interest relief of 25 per cent in 2012. The rate will stay the same in 2013 before falling to 22.5 per cent for 2014-2016. In 2017 it will drop further to 20 per cent, meaning for that year they would get a maximum relief of €2,000 annually for singles and €4,000 for buyers who are married or in a civil partnership.
People who buy their second or subsequent home next year will benefit from a 15 per cent rate of mortgage interest. People who wait until 2013 will get no relief.
If a person buys for €300,000 today and puts down a 10 per cent deposit they will have a mortgage of €270,000. Spread out over 30 years at 4.5 per cent that will cost around €1,289 a month. This year a couple would get €225 off that in mortgage interest relief which would take the net payment to €1,064 a month.
If they were to wait until 2013 and house prices were to fall by 10 per cent over the next 12 months then the same house would only be worth €270,000 next year.
With the same 10 per cent deposit, that would leave them with a mortgage of €243,000 in 2013 but no tax relief on the payments. So a 30-year mortgage at the same rate of 4.5 per cent would mean a monthly cost of €1,160, a fraction less than if they bought now despite the smaller mortgage. But they will also be paying their mortgage for one year after the first couple have paid theirs off and will have paid rent for an extra year.
Cathal Gahan from Dublin is collecting the keys of his first house later this month. He is 29 and has just bought a three-bed, mid-terrace house in Raheny for €200,000, more than €200,000 less than what it would have cost him at the height of the boom.
“I have been saving for the last few years and finally I got into a position where I could afford it. I am buying as a home for the long term,” he says. “My thinking was that I can afford it, it is where I want to live and I have got the financing in place so why wouldn’t I? Of course it might fall in value over the next two or three years but I don’t really mind.”
He used a broker to arrange his financing and says that because he had the 10 per cent deposit and a full-time job, the loan was not a problem. “A lot of my friends are talking about it and asking about the mechanics of the process. The reality is that none of us could have afforded to live here, where we grew up, five years ago.”
And what is the bottom line? His three-bedroom house, once interest relief is factored in, will cost less than €600 a month, a price which compares favourably to similar-sized houses in the area which are renting for €1,000.
According to Daft.ie economist Ronan Lyons, a key point is that recovery will not mean an increase in prices. In the property website’s “State of the Housing Nation” report published last week he said recovery “means an increase in activity” and not a big shift in prices – those days are gone, possibly for ever.
There can, however, be no recovery until banks start lending. Last year Irish banks issued about 13,000 mortgages compared with over 200,000 in 2006, a decline of almost 95 per cent. The financial institutions blame the dramatic decline on a lack of demand because those who would trade-up are mired in negative equity or are clinging to precious trackers and first-time buyers are either unemployed or worried about their jobs.
But experts say that while demand is certainly down, it is not down by 95 per cent. Lyons points out that while 50,000 25-34 year-olds have emigrated and another 50,000 are newly unemployed “there are still over half a million 25-34 year-olds – the household-forming age – at work. These are the people who would, in other circumstances, be kick-starting activity in Ireland’s property market.”
Bank of Ireland has committed to lending €1.5 billion this year. That increase in lending, if it actually happens, would amount to around 65 per cent of all lending last year and would be sufficient to see a significant increase in activity.
Mortgage broker and financial commentator Karl Deeter is surprisingly upbeat about the state of affairs.
“I haven’t been positive about property for half a decade but this year I am,” he says. “My feeling is that most of the heavy lifting is done and while I don’t think we have reached the bottom of the market, I would expect declines to be in the low double digits if that unless we buck all international trends and the correction is in excess of 70 per cent.”
He told Pricewatch last week that he was “happy enough to say that when we look back on today in a decade’s time people will say that this year was a good time to buy a house”. He stresses that good quality houses in established areas are attractive rather than apartments which will struggle to retain or increase their value.
Deeter also believes people should look towards long-term options rather than simply getting on the property ladder as they may have wanted to do a decade ago. “If someone came to me and said they wanted to get on the ladder and did not mind where they bought, I’d ask them to show me their time machine to see if they had come from 2006.”
Financial advisor and director of moneycoach.ie, Frank Conway says that if people come to him in connection with a mortgage the first question he asks is why are they buying.
“If someone is looking to make an investment or because they think the bottom of the market has been reached then I strongly caution against it. There is no way anyone can know when the bottom has been reached. But someone who is buying a home for the long term who has the troika of job security, financing and a property at an affordable price, then it is certainly not a bad time.”
Conway does not, however, believe the market is close to settling. The big problem, he says, is the banks are not lending.
“We need to see cash flow in the mortgage market and I do not see that happening. The conditions have created conditions which mean many people will not qualify for a mortgage.” Things like the occasional credit blip, recent employment after a period without a job or contract-only positions in line with public service recruitment bans are all working against people.”

Nama public auctions unlikely this year - The Irish Times - Fri, Jan 06, 2012

2012-01-09T16:16:00.001Z

PROPERTY WATCHERS and movers alike, who are waiting for a deluge of homes to hit the market this year, are likely to be disappointed.
According to a spokesman for the National Asset Management Agency (Nama), 2012 will not see the staging of a much-vaunted public auction of its stock.
“If you’re waiting for a Nama auction in the Shelbourne Hotel, you won’t see one,” he said. However, for those waiting on the sidelines for a bargain, 2012 will see increased activity from this quarter, as Nama encourages developers to offload properties at “realistic prices”.
“You can certainly expect to see more apartments linked to Nama loans at auction in the coming year,” he added.
This could take the form of a developer specific auction, at which 40 or so apartments built by that developer are sold, or they could be rolled into the various auctions that are already taking place. The agency has about 10,000 properties linked to Nama loans, most of which are apartments in urban areas such as Dublin and Cork.

Durkan slams Nama as building firm repays all its bank loans - Independent.ie

2012-01-09T16:15:00.001Z

By Nick Webb

Sunday January 08 2012

DURKAN Group, the hugely successful UK-focussed construction group founded by Bill Durkan, has slammed Nama after "unsatisfactory" dealings with the €80bn state bad bank.
In an unprecedented move, Durkan decided to pay off €43m in Nama bank loans rather than continue to deal with the lumbering state agency.
Durkan hammered Nama as being unreasonable and leaving the successful construction company in "an invidious and unfortunate position". The process of dealing with the state agency was lambasted as "cumbersome, costly and time-consuming".
Durkan Group, which was founded by Bill Durkan in 1963, has become one of the largest builders of affordable housing in the south-east of England, as well as developing a major contracting business serving the education and healthcare sector. Its Durkan Estates wing is involved in residential developments.
The company had "good loans" or performing loans with Anglo Irish Bank and Bank of Ireland, which were transferred to Nama in December 2010. However, failure to agree a refinancing deal with Nama after an arduous process left Durkan unable to work with the National Asset Management Agency and it was forced to move its business elsewhere.
"On December 23, 2010, Nama advised that it had acquired the Durkan Group loans (all good loans). The group was left in the invidious and unfortunate predicament of having to engage in a cumbersome, costly and time-consuming exercise with an agency whose ultimate aim is the realisation of loans on behalf of the Irish Government," according to Durkan Group documents obtained by the Sunday Independent.
"Negotiations with Nama over facilities and the repayment of the loans proved to be unsatisfactory and would have been most uneconomic if accepted.
"By July 2011, it had become abundantly clear to the group that Nama was not in a position to facilitate the reasonable requirements as set out in our comprehensive business plan submitted to Nama on March 31, 2010. On August 2, the group repaid its entire indebtedness to Nama."
The move by Durkan Group to escape the dead hand of Nama is another blow for the secretive state agency, which has been accused of paralysing the property sector through its failure to kickstart the market by selling assets and greenlighting schemes.
Nama, which was set up in 2009 by the late Brian Lenihan, was established with the aim of restoring liquidity to the banks by helping to decontaminate their toxic balance sheets. It has failed dismally in that regard with mortgage lending last year down a staggering 95 per cent from peak levels.
Last December, a report by former HSBC banker Michael Geogheghan into Nama warned that a failure by the agency to evolve into a more entrepreneurial and confident business was likely to cost the State billions of euro.
Mr Geogheghan warned that Nama had to evolve from its start-up phase into "the pro-active, externally focused, entrepreneurial, confident business it needs to be". His report added that the Nama board was dominated by directors "with control rather than entrepreneurial backgrounds".
Nama must pay off €7.5bn of its €30bn of debt raised to buy over €74bn of loans from the banks by the end of next year. A failure to sell off assets to meet this looming bill "should possibly lead to the assets of Nama being given to one or more third parties to manage", Mr Geogheghan suggested.

Bankruptcy better than Nama noose, says Grehan - Independent.ie

2012-01-09T16:12:00.001Z

By RONALD QUINLAN

Sunday January 08 2012

RAY Grehan's decision to declare bankruptcy in the UK in the dying hours of 2011 shouldn't have taken Nama by surprise. But it did.
Today, Mr Grehan -- who famously paid €171.5m (a record €84m per acre) at the height of the boom to acquire the Veterinary College site in Ballsbridge -- explains his dramatic move, saying it puts him in a "better position to rebuild, rather than staying on and allowing Nama to prolong the agony with a noose around my neck".
By going for bankruptcy in the UK, the Glenkerrin Homes chief will have a clean bill of financial health by the end of this year. Most significantly, the €300m judgement the State's so-called 'bad bank' obtained against him here last November will not be worth the paper it is written on. And while Mr Grehan understands that there will be public anger, given that this money is owed to the taxpayer, it's an anger he believes is misdirected.
"I did not choose to go into liquidation or receivership. I worked with Nama. I signed a memorandum of understanding with them to work out our assets. We were the best-placed people to do that.
"Had they worked with us, they would have got the bulk of the money back -- probably it all -- over the eight-year plan," he claims.
The Galway-born developer's anger towards Nama becomes clearer when he is asked for his view of its chief executive Brendan McDonagh's announcement that the agency would sell a significant proportion of its UK property portfolio by 2013.
"The minute Brendan McDonagh said they were going to unload their assets in the UK over a two-year period, they wiped probably 20 per cent of the value off that portfolio. All the wealth funds in the world are looking at that.
"London is a very small market and a very specialised market. You can't go in there and put several major assets on the market at the one time. It's a very fickle market and one that you work with very carefully and quietly to sell assets," Mr Grehan says.
Referring to his own company's experience in London following Nama's intervention in its affairs, he adds: "I had a deal done for the hotel we had in Shoreditch for Stg£83m (€100m) the week Nama decided to appoint a receiver.
"The buyer was an American fund and they walked away when we were within 12 weeks of completing the hotel extension. They couldn't get certainty as to when it would be finished.
"The receiver put the hotel back on the market and got an offer for Stg£74m. They went into due diligence for 30 days and came back and offered them Stg£64m for the hotel.
"Today, the hotel extension is still not completed and it has cost the taxpayer millions.
"London is a market that only developers know. I've been in that market for 12 years. Nama don't have the expertise or the know-how to work the market for the benefit of the taxpayer."
'The minute that Brendan McDonagh said they were going to unload their assets in the UK, he wiped probably 20pc off the value of that portfolio'
Asked how international investors viewed Nama, he says: "It's very simple. The funds' view is that Nama are not there to deal. The funds' view is that they have wasted a lot of time trying to put together deals with Nama and have met closed doors. A lot of funds are pissed off with Nama.
"Nobody knows what the game is in Nama -- I don't think they know themselves. They have buried themselves in paperwork. As a result, they're very slow with their decisions and I don't think they're able to keep up."
A spokesman for Nama responded to Mr Grehan's claims, saying: "With respect, we don't believe Mr Grehan could be considered an objective commentator on Nama."
Whatever their opinion, Mr Grehan is already going back into business in London.
"Over the last couple of months, I've been approached by several funds to head up various property portfolios for them. Nama has been adamant that clients of theirs cannot get involved in heading up funds and that curtailed my activity in the Irish market.
"By doing this (declaring bankruptcy), maybe it will free me up from that and leave me in a better position to rebuild, rather than staying on and allowing Nama to prolong that agony with a noose around my neck over several years.
"Hopefully, we'll be successful in rebuilding a company that can possibly come back to Ireland in due course. I feel somewhat hurt that I've gathered millions and millions of euro (in taxes) for the Irish taxpayer down through the years and now a State agency (Nama) has basically kicked me out of the place and left me with no choice.
"Over the next few months, you will see a lot of people looking at the same options. I know for a fact there are several well-known people looking at it."
Asked if he regretted the massive €171.5m he paid for the Veterinary College site in Ballsbridge, Dublin 4, he says: "We paid a huge price for it on the day. In hindsight, we overpaid for it. The figures at the time would suggest we would have got a very handsome return had the market held -- but it didn't and it was too big of a bite at the time. These things happen in property."
Mr Grehan's greatest regret, however, is that he and his brother Danny didn't act quickly enough to take "hard decisions" in relation to the company controlling the Vets' College site, decisions that he believes could have saved the Glenkerrin Group.
And while he might be seen as having taken the 'easy way out' by declaring bankruptcy in the UK, Mr Grehan is adamant that he didn't take the decision lightly.
"Bankruptcy is not a lightly taken decision. It's a tough time, watching a portfolio built up over the past 25 years being unwound and taken apart. It takes its toll and it's not where we want to be, but at least we're alive and we're not in the Mater Hospital suffering from a fatal illness. We'll take it on the chin and we'll get back on the road again.
"You look at Donald Trump. He's gone bankrupt three times. In America, you're seen as a more secure credit risk if you've gone through bankruptcy as you're more cautious. Of course you learn an awful lot. I'll be hoping to put it [the experience of bankruptcy] to good use when we come back."

Marc Coleman: Stressed market means prices have fallen too far - Independent.ie

2012-01-09T16:09:00.001Z

By Marc Coleman

Sunday January 08 2012

It was my first and best economics lecturer John O'Hagan who told me that of all the other sciences, economics was closest to medicine. Economies are, like human beings, highly complex and thinking of troubled economies as sick patients is a useful way of grasping that complexity.

One of the most threatening disorders facing our domestic economy and chances of recovery right now is the condition of our property market and the closest medical analogy I can think of to describe the problem is bipolar disorder.

As loved ones of those who suffer from it know, the swing from exhilarated highs to depressive lows is exhausting and distressing. Likewise the property market's swing from the highs of early 2007 to its current lows has taken its toll in the form of reckless personal borrowing, an illusory surge in tax revenues and a resultant wasteful spending binge.

Now we are left with the lows: a depleted exchequer, ruined banks and the millstone of negative equity forcing over a third of a million households to slash consumer spending as they face a lifetime of debt.

As with bipolar disorder, the proper diagnosis is not to exacerbate the swings, but stabilise them. Between extreme highs and lows is a sustainable middle to be reached using the right medication: this week economist Peter Bacon suggested doing for property buyers nationally what Nama does for buyers of its properties; assuming the risk of future price falls. Only then can buyers be enticed back into the market, he reckons. The €1.25bn payment of taxpayers' money to holders of unsecured bonds in Anglo Irish Bank will this month remind us just how willing the State is to assume risks for bondholders. And that is a fraction of the amount guaranteed by the promissory note. Yet it is enough to greatly help refloat the market in the form of a stamp duty rebate that would wipe out much of the negative equity for those who paid a fortune in property taxes during the boom, and who face double property taxation in the future.

As the latest Central Statistic Office house price index shows, average property prices are now 46 per cent below peak 2007 levels and roughly back to 2002 levels. Have they fallen enough? Could they fall further? Have they fallen too far?

The distressed state of the property market strongly suggests the latter to be the case. In its latest survey, the Irish Banking Federation puts the mortgages drawdown total at just 3,607 for the third quarter of last year. When compared to the 53,543 drawdowns in the same period of 2005 -- and even allowing for 2005 being a boom year -- this is a traumatic low. One source -- Rachel Doyle of the Professional Insurance Brokers Association -- suggested that between 60 and 80 per cent of mortgage applications are being refused.

While we need a thorough report to be sure, several indicators suggest that price levels prevailing in the year 2004 -- while overvalued in that particular year -- are probably now a good benchmark of where the market should settle: even if government forecasts are optimistic, Gross National Product and Gross Domestic Product should this year settle at 2004 and 2005 levels, respectively.

Despite widening spreads with base rates, European Central Bank rate cuts mean that retail mortgage interest rates are broadly similar to 2004 levels. Despite higher unemployment, the level of employment, 1,805,500 persons, is consistent with 2004 levels. And despite significant tax hikes, gross income -- which remains the basis for approving a mortgage -- remains above 2004 levels. And despite recession, population growth since 2005 -- a rise of one-third of a million from 4.2 million in 2006 to nearly 4.6 million last year -- has been stunning.

But three factors are hampering the market besides the absence of bank lending: supply, fiscal policy

and negative equity. The supply issue is significant but has been exaggerated. Far from 300,000 properties being vacant the National Institute for Spatial and Regional Analysis estimates that the number of vacant properties is in the region of 100,000. Mr Bacon agrees that the demolition of ghost estates is one way to restore the balance between supply and demand. Against the backdrop of a third of a million population increase -- and with statistics indicating about 2.6 persons per household -- there is no shortage of demand to mop up this excess.

Fiscal policy and bank lending are the more serious obstacles to recovery and here we are witnessing a spectacle out of the Madness of King George, with bewigged doctors applying the quack solutions of bleeding the patient by overtaxation.

In last Thursday's Irish Times one writer asserted that "a lack of property taxes also contributed greatly to the property bubble ... A property tax is therefore essential". But far from there being a "lack" of a property tax around 40 per cent of the €3bn paid in stamp duty between 2004 and 2007 -- around €1.25bn -- was paid by homeowners (the same amount, interestingly, as will be paid this month to Anglo bondholders). So the real cause of the boom-bust cycle was not the absence of any tax but the explosion of credit caused by negative interest rates and poor bank regulation. Planning factors -- a myriad of failures that limited housing supply -- also contributed. The idea that a property tax would have stopped a relentless tidal wave of credit from producing a boom is misguided. The idea that a distressed market can suffer the imposition of a property tax that, according to the ESRI, could amount to €1,000, and have any chance of recovery is misdiagnosis.

So what does the market need? Between 2007 highs and current lows there is a sensible mid-point that can be achieved if bank lending resumes and two more policy changes occur: a decisive shift away from tax increases and towards real spending reductions: having risen by 55 per cent between 2004 and 2009 gross current spending needs to fall now by much more than the mere seven per cent envisaged in the Government's expenditure and reform plans.

The issue of the promissory note must also be revisited: spending billions to guarantee the risk of profit-seeking banks while doing nothing to tackle the negative equity crisis faced by those who merely invested in a family home is neither economically nor politically sound: property will never drive the economy again, nor should it. But by effecting a one-off injection into the market to alleviate negative equity it could be decisive in allowing spending, confidence and household finances to return to normal.

American Airlines, Bankruptcy, and the Housing Bubble : The New Yorker>>> It's different in America!

2011-12-21T13:45:00.001Z

We normally say that a company “went bankrupt,” implying that it had no choice. But when, recently, American Airlines filed for bankruptcy, it did so deliberately. The airline had four billion dollars in the bank and could have kept paying its bills. But it has been losing money for a while, and its board decided that it was foolish to keep throwing good money after bad. Declaring bankruptcy will trim American’s debt load and allow it to break its union contracts, so that it can slim down and cut costs.
American wasn’t stigmatized for the move. Instead, analysts hailed it as “very smart.” It is now generally accepted that when it’s economically irrational for a company to keep paying its debts it will try to renegotiate them or, failing that, default. For creditors, that’s just the price of business. But when it comes to another set of borrowers the norms are very different. The bursting of the housing bubble has left millions of homeowners across the country owing more than their homes are worth. In some areas, well over half of mortgages are underwater, many so deeply that people owe forty or fifty per cent more than the value of their homes. In other words, a good percentage of Americans are in much the same position as American Airlines: they can still pay their debts, but doing so is like setting a pile of money on fire every month.
These people have no hope of ever making a return on their investment in their homes. So for many of them the rational solution would be a “strategic default”—walking away from the mortgage and letting the bank take the house. Yet the vast majority of underwater borrowers keep faithfully paying their mortgages; studies suggest that perhaps only a quarter of all foreclosures are strategic. Given how much housing prices have fallen, the question is why more people aren’t just walking away.
Part of the answer is practical. Defaulting (even in so-called non-recourse states) is still a lot of trouble, and to most people it’s scary. In addition, homeowners are slow to recognize how much the value of their homes has dropped, and have inflated expectations of how much it will rise in the future. The biggest hurdle, though, is social: while companies get called “very smart” for restructuring their contracts, there’s a real stigma attached to defaulting on your mortgage. According to one study, eighty-one per cent of Americans think it’s immoral not to pay your mortgage when you can, and the idea of default is shaped by what Brent White, a law professor at the University of Arizona, calls a discourse of “shame, guilt, and fear.” When the housing bubble burst, the banking industry was terrified by the possibility that homeowners might walk away en masse, since that would have stuck lenders with large losses and a huge number of marked-down homes. So strategic default was portrayed as the act of dishonorable deadbeats. David Walker, of the Peterson Foundation, waxed nostalgic about debtors’ prisons, and John Courson, the head of the Mortgage Bankers Association, argued that defaulters were sending the wrong message “to their family and their kids and their friends.”
e-mail this
Paying your debts is, as a rule, a good thing. But the double standard here is obvious and offensive. Homeowners are getting lambasted for doing what companies do on a regular basis. Walking away from real-estate obligations in particular is common in the corporate world, and real-estate developers are notorious for abandoning properties that no longer make economic sense. Sometimes the hypocrisy is staggering: last winter, the Mortgage Bankers Association—the very body whose president attacked defaulters for betraying their families and their communities—got its creditors to let it do a short sale of its headquarters, dumping it for thirty-four million dollars less than the value of the building’s mortgage.
When it comes to debt, then, the corporate attitude is do as I say, not as I do. And, while homeowners are cautioned to think of more than the bottom line, banks, naturally, have done business in coldly rational terms. They could have helped keep people in their homes by writing down mortgages (the equivalent of the restructuring that American Airlines’ debt holders will now be confronting). And there are plenty of useful ideas out there for how banks could do this without taxpayer subsidies and without rewarding the irresponsible. For instance, Eric Posner and Luigi Zingales, of the University of Chicago, suggest that, in exchange for writing down mortgages in hard-hit areas, lenders would take an ownership stake in a house, getting a percentage of the capital gain when it was eventually sold. Lenders, though, have avoided such schemes and haven’t done mortgage modifications on any meaningful scale. It’s their right to act in their own interest, but it makes it awfully hard to take seriously complaints about homeowners’ lack of social responsibility.
Of course, many borrowers made bad decisions and acted irresponsibly. But so did lenders—by handing out too much money and not requiring sensible down payments. So far, banks have been partially insulated from the consequences of those bad decisions, because Americans have been so obliging about paying off overinflated mortgages. Strategic defaults would help distribute the pain more evenly and, if they became more common, would force lenders to be more responsible in the future. It’s also possible that a wave of strategic defaults—a De-Occupy Your House movement—would get banks to take mortgage modification more seriously, which would be all for the better. The truth is that banks have been relying on homeowners to do the right thing. It might be time for homeowners to do the smart thing instead. ♦

ILLUSTRATION: Christoph Niemann

via newyorker.com

London calls for Irish estate agents - The Irish Times

2011-12-21T13:40:00.001Z

FRAN O'ROURKE
WANTED: Irish estate agents. No, it’s not Irish property buyers out seeking revenge, but a recruitment agency which is holding a roadshow in Dublin in January aimed at finding agents to work in the London property market.
Property recruitment specialist Deverell Smith Recruitment has found jobs for more than 30 Irish agents in 2011 alone, including placing “a dozen into top-tier brands in Mayfair, Chelsea, Kensington, earning five to six times what they could in Dublin”, says managing director Andrew Deverell Smith.
The agency is, apparently, the first port of call for international firms such as Knight Frank, Savills and Hamptons when they’re looking for property employees.
So on the weekend of January 14th and 15th, two consultants from the agency will come to Dublin to interview prospective candidates, who should make contact now to get an appointment.
Why London? “It’s where the demand is, where money can be made,” says Deverell Smith.
What they’re looking for, he says, is all kinds of agents “who’ve been successful, have great CVs, references and commitment”. He adds, “Irish charm goes a long way.”
Having qualifications is good “and we’ve placed a lot of graduates, but when push comes to shove, experience and character and charisma is what counts. We’re looking for people with experience, credibility, drive and a commitment to relocating.”
If on top of having the above, an agent can speak (in this order) Russian, Chinese, Hindi, Italian or Greek, it could give them an edge.
The rewards can be high: agents typically charge vendors 2 per cent of the sale price. “If you sell a property worth £5 million , that’s £100,000 ,” says Deverell Smith.
Interviews in January will be “an informal half-hour chat”.

BoI takes control of properties as it pursues O'Donnells - Independent.ie

2011-12-21T13:37:00.001Z

By Siobhan Creaton

Friday December 16 2011

BANK of Ireland has taken control of three prestigious buildings in Dublin's Merrion Square owned by a Celtic Tiger couple who amassed a €1bn global property empire.
Solicitor Brian O'Donnell and his wife Mary Pat own 61 and 62 Merrion Square, two five-storey period buildings, and an adjoining property at Fitzwilliam Lane. The three properties, which are interconnected and are rented out as offices, are up for sale.
The O'Donnells put them on the market as part of their efforts to repay Bank of Ireland €71.5m, which the High Court has ruled that they owe. The properties were valued at €30m in 2005.
Speaking to the Irish Independent this week, Mr O'Donnell said he was "stunned" by the bank's lack of communication with him and his wife.
Aggressive
He said the couple were "seeking a solution" to their massive financial challenges but the bank was aggressively pursuing the debt.
This newspaper has learned that the bank appointed Tom Kavanagh of Kavanagh Fennell as receiver to the three Dublin offices recently. Mr O'Donnell is said to have learned of his appointment from the couple's tenants after Mr Kavanagh had arrived to tell them that the complex was in receivership.
Mr Kavanagh did not return calls last night.
The O'Donnells also own 84 Ailesbury Road, another prestigious property that is expected to be put up for sale by the bank.
The O'Donnells believe that Bank of Ireland's relentless pursuit of them is designed to scare other lawyers, doctors and professionals who owe it money.
The bank is expected to move to repossess their luxury home, now that it has secured judgments for €71.5m. Under an agreement that the bank says has been breached, it can move to take their palatial Killiney home, 'Gorse Hill' on the Vico Road, in the coming months.
The 9,000sq.ft property overlooks the sea and has a swimming pool, tennis court, stables, gym and sauna. The couple purchased the 1.25 acre site in 1997 and extensively developed it.
- Siobhan Creaton

Quango costs us €4m before even starting its work - Independent.ie

2011-12-21T13:35:00.001Z

By JEROME REILLY

Sunday December 18 2011

A GOVERNMENT quango set up to investigate rogue estate agents has not carried out a single investigation despite costing the taxpayer more than €4m, not including lavish new offices.
The National Property Services (Regulation) Authority (NPSRA), which has nine staff including a chief executive designate, was set up in 2006 and was a child of the Celtic Tiger.
Its job is to investigate and punish errant estate agents, property management companies and auctioneers who break the rules, but legislation granting it those powers was not passed by the Dail until last month.
The authority's first job will be preparation of a property register, giving all details of residential sales in 2010 and 2011. But the delay in passing the legislation means millions of euro has already been wasted.
The NPSRA's budget for this year totalled €738,000, which does not include the cost of accommodation -- rent, service charges, maintenance -- which is paid for by the OPW, which is locked into a controversial upward-only rent review agreement on the building.
The agency has been headquartered at the Abbey Mall premises in Navan rented to the OPW.
A number of other state bodies are housed in the building on a 20-year, upward-only rent agreement which began in January 2008 -- on which a further €9,781,120 will be paid out by the time the lease is up.
A spokeswoman at the Department of Justice told the Sunday Independent: "The functions of the authority will include the investigation of complaints against licensees (ie auctioneers, estate agents and property management agents) and the imposition of sanctions in respect of improper conduct. It will also carry out investigations on its own volition."
The spokeswoman said that in advance of it becoming a statutory body, the authority has been "very active in putting in place a solid foundation for the organisation".
"This is to enable the authority to hit the ground running when the bill becomes law," she said.
The NPSRA website says that it will have the power to issue sanctions against estate agents, auctioneers etc, up to and including the revocation of a licence, and may also impose fines of up to €250,000.
A director designate was appointed in June 2006 and nine staff appointed.
The office was allocated a budget of €700,000 for 2007, €930,000 for 2008, €657,000 for 2009, €738,000 for 2010 and €738,000 for this year.
- JEROME REILLY

Landmark town centre site for sale in Clonmel. Final expressions of interest before 20th Dec.

2011-12-14T11:14:00.001Z

We are currently offering a site at Queen St, Clonmel. It is a Landmark Town Centre site, formerly a Chadwicks store and yard which was sold for development in 2004. We are guiding €750,000 with final expressions of interest by 20^th Dec next. The property comprises 0.67HA(1.66acres) with c.2,800sq m (30,000sq ft) covered space. It is Zoned objective C “to provide for commercial development and related uses.”

See the full gallery on Posterous

€uro50 store opens today in Ormonde Centre, Gladstone St, Clonmel.

2011-12-14T11:13:00.001Z

€uro50 opened in Clonmel’s Ormonde Centre today. It is their second store in Ireland, following opening in the Ilac centre last month.

They occupy 8,000sq ft retail plus 3,500sq ft storage. They join DV8 and 6^th Sense in the Ormonde Centre, which is a town centre redevelopment of the former Tesco store, on Gladstone St, beside the main town car-park (and opposite our office!).

About 200 people queued for the 10am opening and the crowd built rapidly thereafter.

Following a successful year of letting at the centre, we have just 7,000sq ft left of the original 30,000sq ft, with lots of interest in the remainder.

Don’t forget to call us for any information...:)

via societyofcharteredsurveyorsireland.newsweaver.com

Property Professional Groups News - Budget 2012 - Property Measures>>> via SCSI

2011-12-08T13:47:00.001Z

Stamp Duty
Stamp Duty – Reduction from 6% to 2% for commercial property effective midnight 6^th.
No change to current Stamp Duty regime for residential property.
Consanguinity relief on transfers of non-residential properties to be retained for intra-family transfers to end-2014. Abolished after 1 January 2015.

CGT
Capital Gains Tax incentive for property purchased between midnight 6th December 2011 and the end of 2013;
Gains relieved from CGT provided property purchased during this period is held for at least 7 years.

Mortgage Interest Relief
Increase in the rate of mortgage interest relief to 30 per cent for first time buyers who took out their first mortgage in the period from 2004 to 2008;
First Time Buyers who buy a home in 2012 will get mortgage interest relief at a rate of 25 per cent
Non First Time Buyers who buy a home in 2012 will benefit from Mortgage Interest relief at 15 per cent
Mortgage interest relief will no longer be available to house purchasers who purchase after the end of 2012 and will be fully abolished from 2018;

Legacy Property Tax Reliefs
Effective from 1 January 2012 a property relief surcharge of 5 per cent will be imposed on investors with an annual gross income over €100,000. This will apply on the amount of income sheltered by property reliefs in a given year.
Investors in Accelerated Capital Allowance schemes will no longer be able to use any capital allowance beyond the tax life of the particular scheme where that tax life ends after 1 January 2015. Where the tax life of a scheme has ended before 1 January 2015, no carry forward of allowances into 2015 will be allowed.

CAT
The current rate of 25% is being increased to 30%. This increase applies in respect of gifts or inheritances taken after 6 December 2011;
The current Group A (parent to child) tax-free threshold is being reduced from €332,084 to €250,000 . This reduction applies in respect of gifts or inheritances taken after 6 December 2011.

Household charge
A household charge of €100 is being introduced in 2012;
This is an interim measure pending design and implementation of a full property tax, which will apply in 2014.

CGT
increase in headline rate of CGT has increased from 25% to 30%

Stamp Duty

NAMA

The Minister has decided not to proceed with proposed changes to legislation affecting commercial property leases entered into prior to 28th February 2010, in terms of interfering with upward only rent reviews.
NAMA has a policy guidance for dealing with tenants’ difficulties arising from upward only rent reviews.
NAMA may approve rent reductions where it can be shown that rents are in excess of the current market levels and continued viability of the business is threatened. Number of conditions to be satisfied.
Provision for the appointment of an independent valuation of market rent where necessary.
Minister to establish an Advisory Group (“The Group”) to advise on NAMA’s strategy and its capacity to deliver on that strategy through property disposal and the ongoing management of assets;

Mortgage Arrears
Government established a group to consider necessary actions.
A formal announcement on the next steps is expected shortly.

Rents could crash following Budget moves over benefits - Independent.ie

2011-12-06T15:04:00.001Z

MORE than 130,000 property investors could face a massive blow in the forthcoming Budget as proposed plans to overhaul the €510m rent supplement scheme could see rents crash.
Joan Burton, Minister for Social Protection, is seeking to cut the €510m annual rental-supplement bill paid by her department as part of the forecast €700m cut to the benefits budget.
Some 95,700 people in the country are in receipt of the rent supplement payment -- which ranges from €500 per month for a family with three children in Leitrim up to €1,100 per month for a similar family in south Dublin.
The number of people receiving the benefit has jumped 60 per cent since 2005, when the total bill was €369m.
It is understood that Ms Burton's department is looking at using its massive buying power to bring down the rents charged by landlords, as well as changing the limits and conditions associated with the benefit.
However, the supplement is believed to massively distort the private rental market as the sheer volume of payments has kept monthly rents artificially high. Rents this year have remained reasonably steady -- rising 0.1 per cent in the third quarter of the year. Private rents fells sharply in 2009 but have been reasonably constant since then.
Cutting the ceiling on rental payments could see monthly rents crash dramatically, according to property analysts. This will cause increased pressure on the middle classes who invested in rental properties during the boom years.
Falling rents, the second-homes tax and crushing negative equity add up to a major problem for owners of apartments. Government figures show that 99,000 people own a second property with a further 35,000 owning three or more properties .
Latest Central Bank figures show that close to 100,000 mortgages are either in arrears or have been restructured by banks -- that's more than one in 12 home loans.
A major fall in rental prices is likely to see investors face more problems in paying loans on rental properties, which may lead to a spike in arrears and an increase in repossessions by banks.
- Nick Webb

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Lloyds plans €1bn Irish sell-off

2011-12-06T14:52:00.001Z

by Sunday Business Post 4.12.11

Lloyds plans €1bn Irish sell-off
4 December 2011 by Gavin Daly
British bank Lloyds plans to put €1 billion-worth of Irish property into receivership as it accelerates the closure of the loan book of the former Bank of Scotland (Ireland).
The plan will affect hundreds of properties, including hotels, shops, office blocks and residential developments.
It is understood that the bank will ramp up its receivership activity early in the new year.
Lloyds stuck a deal earlier this year with Irish firm Green Property to manage at least €1 billion worth of Irish loans. However, it has emerged that Lloyds plans to put the companies behind the loans into receivership first, and allow the receivers to decide whether or not to use Green's asset management services.
Some properties are likely to be sold during the seven-year deal with Green, although the bank has not ruled out creating a property fund that could be sold on in one or more pieces. The bank has described the plan as "a medium-to-long-term solution for the Irish property market, where the challenges are significant".
Bank of Scotland (Ireland) banked dozens of hotel developments during the boom years.
It was the lender to Ashford Castle, which was last week put into receivership with the agreement of the hotel's owner, developer Gerry Barrett.

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€uro 50 store fit-out is nearly complete in Clonmel's Ormonde Centre. Opening 14th Dec!

2011-12-06T14:37:00.001Z

Ireland’s newest discount chain, who recently opened its first store in the heart of Dublin to snaking queues – will open in The Ormonde Centre, Gladstone St, Clonmel next week.

Fit-out is proceeding at a rapid pace, with the ceiling completed, the floor almost. Racking is going in tomorrow, then stock will be put in over the weekend.

The store consists of an 8,000sq ft unit, facing directly onto the main Town Car-Park. €uro 50 joins DV8 and 6^th Sense who are already trading very successfully in this town centre location.

The retail chain is part of the 99p Stores Group, which has 150 branches in its portfolio.

Faisal Lalani, Managing Director of €uro 50 Stores, says:

“We are committed to using Irish suppliers throughout our expansion programme and hope to provide new opportunities for Irish suppliers through our existing UK store network".

“We will have more than 4,000 different product lines, many of which will change weekly, so there is always something new every time customers visit.”

The new ‘€uro 50 Stores’ chain sees items at €1.50 or less.

The new stores will see departments from babywear to biscuits ; cosmetics to chilled products ; minerals, sweets and crisps ; hot drinks to DIY; food to fashion ; greeting cards to gifts ; pet-care to party-wear and stationery. The stores will also stock hundreds of themed products like Halloween and Christmas lines.

More than 70% of products will be well known leading household brands such as Colgate, Disney, Johnson’s, Nivea, Palmolive, Pringles and Radox.

This is another great vote of confidence in Clonmel’s town centre, following on the recent opening of Holland & Barratt on the same street.

State paid €1.8m for three-acre site in 2009 . . . now it's worth €40,000 - Independent.ie

2011-11-28T16:16:00.001Z

THE State spent €1.8m buying three acres of land two years ago even though the building planned for the site was already in doubt. The land in Thomastown, Co Kilkenny is now worth around €40,000.
The site was earmarked for the new Health and Safety Authority (HSA) headquarters as far back as 2003.
But decentralisation plans were already in doubt when it was eventually bought in 2009. They have since been scrapped.
Auctioneers believe there is only a "very slim chance" that the State will now be able to sell the land. It is now likely that it will be rezoned back to agricultural use so it can be rented out to a farmer.
The Irish Independent contacted the Department of Public Expenditure and Reform on Wednesday. But it did not provide any answers on why the sale went through in 2009.
An advance party of 27 staff had moved to an "interim office" in Kilkenny city in 2008 while they awaited transfer following the completion of the headquarters. The bill for renting this office costs €79,000 per annum. It remains to be seen if the civil servants will stay in the rental accommodation.
Labour councillor in the area Michael O'Brien said it was clear in 2008 that the decentralisation "dream" was over.
At the time, he asked the Government to "cut the waffle".
However, the purchase of the three acres of land near Grennan College went ahead.
Other sites purchased for decentralisation projects include a 2.1-acre site in Drogheda at a cost of €12.4m; a three-acre site in Dungarvan for €2.1m; 2.1 acres in Edenderry for €1.5m; 5.3 acres in Mullingar for €8.25m; and three acres in Waterford for €8m.
- Eimear Ni Bhraonain

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Property & Construction News - Landowners targeted for unpaid tax

2011-11-28T16:06:00.001Z

Landowners targeted for unpaid tax
27 November 2011 by Gavin Daly
The Revenue Commissioners have set their sights on landowners who got hefty payments, sometimes running to tens of millions of euro, from the state under compulsory purchase orders (CPO) during the boom years.
Hundreds of millions of euro were paid out to landowners in recent years when their land was bought under CPOs to build motorways and other infrastructure projects. The tax authority has now started auditing people who received CPO payments to see if they have paid capital gains tax, which is charged at 25 per cent.
According to internal Revenue documents, 50 audits have been completed so far. Just seven out of the 50 resulted in a 'nil yield' to the taxman, suggesting that the majority of those audited made some settlement.
Revenue has started its investigations in the east and south-east region, which covers counties Carlow, Kilkenny, Kildare, Laois, Meath, Tipperary, Waterford, Wexford and Wicklow. Revenue has written to the roads managers in all counties in the region, seeking details of all CPO payments they have made in recent years.
The majority of the country's main motorways pass through those counties. They included the recently-built M3 between Dublin and Meath, the M7 between Dublin and Limerick, the M8 to Cork, and the M9, which serves Waterford.
It emerged earlier this year that Laois County Council paid €54.9 million to 135 landowners along the final section of the M7. The landowners received 2006 prices for their land because the CPO legislation states that the price to be paid is based on land values when a local authority first moves to take possession of the land

NAMA loses second board member in two months - Independent.ie

2011-11-28T15:15:00.001Z

THE State's toxic debt agency NAMA has lost a second director in little over two months. Former Bank of Ireland executive Michael Connolly resigned from the agency last night.
In a statement, NAMA chairman Frank Daly thanked Mr Connolly for his service on the board "during an exceptionally busy and challenging period".
Mr Connolly was in charge of NAMA's credit committee -- which oversees lending by the bad bank and signs off on any deals to roll over loans to developers. Mr Connelly stepped down just two years into a five-year term. He could not be reached for comment last night.
It is the second board level resignation from NAMA after Peter Stewart resigned in October. It is also the second board level resignation since London-based senior banker Michael Geoghegan undertook a wide ranging review of the agency.
The opportunity to fill the slots, combined with the Geoghegan review, may well provide Finance Minister Michael Noonan with a unique opportunity to put his own stamp on the agency. Appointments to the board are at the discretion of the minister.
- Donal O'Donovan

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Property & Construction News - Commercial Review 2011: Mixed bag for commercial market

2011-11-28T15:14:00.001Z

The commercial property market is full of contrasts. On one hand, the occupational end of things is doing quite well, with the levels of take-up reasonably good when compared with 2009 and 2010. On the other, the investment market is at a complete standstill pending the government's decision as to whether it will ban upwards-only rent reviews in existing leases.
Focusing on the occupational markets, the retail, office and industrial sectors all performed relatively well, particularly in prime areas. Vacancy is falling across all sectors in prime locations and, in general, take-up of accommodation is similar to pre-2005 average levels.
Commercial rents peaked in the latter half of 2007 and now seem to be at the bottom of the cycle. Lisney's rental indices show that, on average, commercial rents are down approximately 48 per cent, with office rents down by as much as 55 per cent.
In the office sector, take-up in the first nine months of the year was almost 131,000 square metres, surpassing the level achieved in 2010 as a whole (125,000 square metres). We estimate a year-end figure of over 160,000 square metres, which is in line with the 15-year average, excluding the boom period of 2006 to 2008.
The largest deals during the year include Google's purchase of Montevetro building on Barrow Street, and lettings to Paddy Power in Belfield and Bank of Ireland in Burlington Plaza.
Unsurprisingly, Grade C buildings (obsolete or nearing obsolescence) are only securing a small proportion of market activity. In the first nine months of the year, such accommodation only accounted for 4.2 per cent of all take-up. With rents for better quality buildings so low, occupiers are now able to secure good quality, well-located buildings on excellent terms.
This will lead to some issues towards the end of 2012 when very little Grade A (new and never occupied) stock will remain available. With only 11,100 square metres of new space completed so far this year, the vacancy rate continues to fall, and is likely to maintain this trend given that there are no new schemes planned for completion in the short term. However, vacancy is still at historically high levels, with the overall Dublin market at 21.2 per cent, but with certain suburban areas over twice this figure.
Moving to the industrial market, overall activity levels are similar to 2010, which is good news as it points towards steady demand. We estimate a take-up of between 140,000 and 170,000 square metres this year, depending on whether or not a number of large deals are completed by year-end.
Since the summer months, we have seen an increase in the number of smaller transactions of less than 1,000 square metres. The reason for this seems to be that some small businesses now have a bit more clarity on how their business will perform over the coming year, and are therefore willing to enter into very flexible leases to reflect this.
With the larger transactions, demand is being driven by logistics operators connected with the food and medical sectors, but this demand is not to the same degree as was seen in 2010.
Over the 12 months to the end of September, available industrial accommodation decreased by 2.6 per cent. This figure would have been greater but for a large number of premises coming to the market through receivers. Overall, the vacancy rate for industrial property in Dublin now stands at a rate of about 17 per cent but, as with the office market, there are wide variations across geographical areas.
In the retail market, trading remains tough. Central Statistics Office statistics illustrate that the volume and value of retail sales are still falling, down 21 and 26 per cent, respectively, since mid-2007, while consumer sentiment remains low.
Rents in this sector have fallen by an average of 40 to 50 per cent from the peak of the market, and for the past two to three years, new international retailers to the Irish market have been taking advantage of this and signing deals on flexible terms. Their interest is focused on prime high streets and in prime shopping centres, and examples include Hollister, Republic, Name It, Forever 21 and Abercrombie & Fitch.
A number of transactions were completed on Grafton Street during the year, indicating that the street's decline may have been arrested. Such deals include lettings to Disney and Skechers, and a sale to Brereton Jewellers.
Another notable development during the year was the first round of rent reviews in Dundrum Town Centre, where arbitrators awarded Zone A rental increases of about 50 per cent on initial rents. However, it must be remembered that many of these rents date from two to three years prior to the centre opening.
Single price and supermarket discount retailers are making up a large proportion of market activity as a result of expansion plans by a number of operators, such as 99p Stores (trading as Euro 50 Stores) and Poundland (as Dealz). In the supermarket sector, Iceland is expanding into a number of areas around the country.
Also in the supermarket sector, the Musgrave Group has reached an agreement to purchase Superquinn, which will push its market share ahead of Dunnes (at 22.9 per cent) and just slightly behind Tesco (27.9 per cent).
Availability on prime high streets and in core suburban shopping centres is reducing. While it is difficult to track exact vacancy levels, we have sought to monitor prime retail units in the Dublin market where no trading is taking place, ie a 'shutter count', and found that at the end of quarter three, unoccupied units on prime high streets and in prime shopping centres ranged between 1.6 and 5.4 per cent of the total number of units.
Moving on to the investment market, following some improvements towards the end of 2010, yields began to move out again during the year. When combined with some further falls in rents (albeit minor falls compared to previous years), capital values fell further. The IPD indices show that values are down by just over 63 per cent since the peak of the market in 2007.
The retrospective rent review proposal is having a major impact on the market, and will continue to do so until the government makes its mind up. In fact, it is the single biggest issue that has faced the investment market in a generation. We were promised draft legislation after the summer Dáil recess, however at the time of writing this has still not materialised.
At this stage, whether you are for or against the legislation is almost irrelevant - what is important is that something is done immediately, as the government's inaction is creating such uncertainty that the investment market is effectively dead.
During the early part of the year, a number of transactions that were agreed in 2010 fell through because of the proposals, the most notable of these being the sale of the Liffey Valley shopping centre. As the year progressed, potential purchasers sat on the sidelines waiting for the government to make a decision.
For the year to date, there have only been five significant investment transactions, totalling about €174 million, of which 77 per cent relate to special purchaser deals, ie Google and Penneys acquiring the accommodation they already held under a lease (Gordon House, Gasworks House and Chapel House).
In reality, investment turnover is only about €39 million, which is shockingly low. Even given the poor state of the property market, this is an exceptionally low level. Even in 1996 (before the property boom), investment turnover was €250 million, 44 per cent more than the €174 million experienced this year (and 543 per cent more than the €39 million figure). There were 30 more individual transactions completed in 1996.
Looking towards 2012, there are a number of positives to focus on.
Ireland has regained some ground in terms of competitiveness and certain occupiers are now making the decision to commit to Ireland - Google is a prime example of this. In the office sector, we estimate that there are combined occupier requirements of more than 100,000 square metres in the Dublin market, which is excellent news for take-up next year. Most of these companies have a preference for the city centre.
If you consider the prime city locations of Dublin 2 and 4, there are only 78,500 square metres of Grade A space available, and it is understood that much of this is under active negotiation. For larger occupiers requiring 5,000 square metres or more of brand new accommodation in this area, there are currently only five buildings to choose from.
It is likely that this scarcity issue will come to a head towards the end of next year, but the economics of the market are not sufficiently readjusted to make speculative development feasible yet - it may take up to two years for any significant growth to resume.
With industrial property, larger stock is again becoming limited, particularly accommodation greater than 10,000 square metres in the Dublin south-west region. In addition, Ireland is becoming a key location for data centre developments, with a number of high profile operators choosing to locate in Dublin.
During the year, companies such as Data Reality Trust, Amazon and Google secured sites for data centre schemes. With energy and labour costs continually improving, and if the correct investment is made in Ireland's bandwidth infrastructure, the country could become a leading international centre for data providers.
The drop in prime vacancy rates, coupled with an increase in the number of international retailers seeking representation in Ireland, gives cause for some optimism in the retail market. Nevertheless, it is likely that retailers will continue to adopt a cautious approach, with many becoming increasingly innovative and flexible in a bid to drive turnover and margins.
While rents now seem to be relatively stable - at or close to the bottom of the cycle - if the proposed changes to the historic rent review structure are implemented, we may well see yields settle at or about 100 basis points higher than historic levels.
The 20-year average prime retail yield is 5 per cent, and the office yield is 6.25 per cent. Yields settling closer to 6 per cent and 7.25 per cent will have major implications for Irish banks, Nama and pension funds, as it translates into a further 20 per cent reduction in capital values.
All things considered, commercial property performed reasonably well during the year, with perhaps the lack of any real investment transactions being the major disappointment. Hopefully, 2012 will witness further improvements, with renewed overseas interest from both occupiers and investors.

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Property & Construction News - Review of the Year: Capital punishment

2011-11-28T15:12:00.001Z

As is probably little surprise to most, house prices fell significantly again in 2011, the fifth year in a row that prices were lower at the end of the year than at the start.
According to Central Statistics Office figures, prices will fall by about 15 per cent in 2011, compared to 10 per cent in 2010 and 20 per cent in 2009. The average house price was down 44 per cent from the peak by late 2011, while the average apartment price was down 57 per cent.
Prices in Dublin have fallen the most - detailed regional information from the property website Daft.ie shows that while asking prices in some rural counties are down by 40 per cent from the peak, those in Dublin are down by more than 50 per cent on average. If the typical buyer is securing a discount of about 10 per cent of asking price, this means that prices have fallen by 55 per cent in the capital.
At first glance, it might make sense that prices in Dublin are falling by more than they are elsewhere. After all, isn't that where prices went craziest during the boom years? But 2011 also saw the first of the fire-sales of residential properties, principally by British auctioneer Allsop.
These fire-sales give us valuable data-points about what the 'sell-it-tomorrow' price of property around the country is currently, and they are telling us that property values are down by about 65 per cent in Dublin, but by up to 75 per cent elsewhere in the country.
So, are prices in Dublin falling by more or less? The answer lies in what economists call liquidity, the ease with which a seller can find a buyer. In markets such as Dublin, there are still some transactions taking place, so a seller is getting some signals from the market.
With lending down over 90 per cent though, there are very few transactions happening in most parts of the country outside the main cities. This means that sellers in provincial markets find it very difficult to gauge conditions when they go out to sell and are thus, given the sums of money involved, cautious on cutting prices.
So Dubliners should not necessarily regard current trends that suggest prices for their homes have fallen by more as a negative sign, or that Dublin will be punished more for its boom-time sins. Instead, they should see it as a positive sign: if everywhere has to fall by, say, 60 per cent, then Dublin is closer to bottoming out.
But just how far do prices have to fall from the peak? There are the "gravity fundamentalists", those who believe that what goes up must come down, in house prices as in everything else. And, in large part, they are right.
House prices in Ireland in 1995, just as the Celtic tiger started, were no higher than in 1975, when records started, once general inflation is stripped out. So by their logic, the average house price will have to fall from €360,000 to about €100,000 before the market bottoms out, or a 70 per cent fall from the peak.
Stagnant house prices in Ireland over those two decades was nothing to do with a stagnant Irish economy. It's probably one of the strongest findings in relation to house prices internationally: once you take account of inflation, house prices don't go up.
For example, over the last 50 years, house prices in the US have increased ahead of inflation by less than half a per cent a year.
It even stretches to a centuries-long perspective: a study of one canal in Amsterdam found that house prices increased by less than 0.1 per cent above inflation between their construction in the 1600s and today. Housing may be very good at fighting inflation and storing value, but it's a terrible investment if you're looking for capital gains.
However, gravity is not the only force at work in property markets. If we want to understand where prices will settle, we need to take account of the huge changes in the Irish economy since 1995. In particular, the typical household has more earners and - believe it or not - each earner takes home a higher disposable income now.
Given that healthy housing markets are almost entirely based on mortgage finance, in turn reflecting a household's disposable income, this matters.
Assuming the underlying multiple of household income hasn't changed since the 1990s, this suggests that house prices need to fall about 60 per cent from their peak.
The income multiple is not the be-all-and-end-all, however. It doesn't reflect migration and the balance between supply and demand, for example. Nor does it reflect the fact that Ireland moved from its own currency to the euro.
To do that, we need to look at interest rates and at the ratio of rents to house prices.
Assuming the troubled euro survives (with Ireland still in it), this means that the average interest rate on a mortgage should be different to what we had under the punt.
The rate might not be the 4 per cent that fuelled the headiest days of the bubble, but it should be less than the 8 per cent average seen in the 1990s. If it's above 4 per cent, but below 8 per cent, you won't go too far wrong in assuming that Irish mortgage borrowers will enjoy an average interest of 6 per cent over the lifetime of their mortgages.
The other piece of the puzzle is rents. Rents reflect disposable income, but also incorporate everything from migration and oversupply to the value of local amenities. Ultimately, the value of a property is determined by its rental value.
This is why what happens in the rental market should be of interest not just for tenants and for landlords, but also for owner occupiers.
Since early 2010, rents have effectively stabilised, particularly in the cities, suggesting some underlying value for accommodation, assuming rent supplement is not distorting the market.
So if we know the level of rents and prevailing interest rates, where will house prices settle? The relationship between house prices and rents is not a straightforward one, but it's easiest to see it thus: annual rent relative to the house price is the equivalent of the interest rate on a savings account.
If someone offered you a 5 per cent annual return on savings, you'd take it in this environment. But if that 5 per cent was on property, which carries greater risk, would you take it? Currently, those buying at the fire-sales are holding out for a 10 per cent return.
This presents first-time buyers with an easy rule of thumb if they want to mimic those fire-sale purchasers: to come up with their offer, they need only find out the annual rental bill of the property and multiply it by ten. It would also, however, mean a 75 per cent fall in property prices from the peak.
Fire-sale prices are cash prices, and a sustained 10 per cent yield on property here would draw in international investors pretty quickly, pushing up prices: rental yields in most European countries are closer to 5 per cent.
Based on what happened in Ireland before the bubble, a market with normal channels of credit should see the yield settle about 6.75 per cent. If the rent-house price relationship does indeed go back to normal, and rents stabilise where they are now, this would suggest that the average house price should be about €150,000, or a fall of 60 per cent from the peak.
The key phrase is "normal channels of credit". As long as there is effectively no mortgage lending in Ireland - lending was down almost 95 per cent by mid-2011 - house prices will not stabilise where they "should" be. They will overshoot down towards the cash-only price we are seeing at the fire-sale auctions. And overshooting is very worrying for two reasons.
The first is the mortgage arrears problem. Contrary to the government's actions so far, variable interest rates of 4-5 per cent don't cause arrears: negative equity and unemployment cause arrears.
And government policy in this area, bullying the banks about interest rates, is not even neutral, it is actually making the problem of arrears worse. Diktats that prevent banks returning to sustainable lending at sustainable interest rates mean they lend less, which pushes prices even lower, making negative equity - and arrears - worse, not better.
The second problem with the lack of any functioning mortgage market is that overshooting on the way down dramatically increases the risk of a new bubble in future. It may seem contrarian to the point of comedy to be worrying about the next bubble already, but the danger is real.
House price expectations are adaptive: this means that people take what happened over the last five years, expect that to happen over the next five and base their decisions on that.
This behaviour is at the core of how buying frenzies and bubbles happen. So falling below a 'natural level' of house prices in Ireland of, say, €150,000 to a credit-constrained price of €130,000 and then rebounding back up is not the same at all as reaching that natural level and staying there.
Ultimately, we must remember that recovery in the property market is about transactions, not about prices. If credit returns at all in 2012, we may see activity return and prices level off in Dublin and the other cities. But credit won't return until banks are told as part of their stress-test check-ups that while they have to deleverage, new lending is a separate category.
If that doesn't happen, prices will continue to fall into 2012 and beyond. Even worse, they may overshoot, making the arrears problem worse and even risking another bubble.

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Property & Construction News - Proposed scheme aims to revive property market

2011-11-28T15:05:00.001Z

Proposed scheme aims to revive property market
27 November 2011 by Richard Curran
Two Dublin businessmen have come up with a proposal for a scheme to encourage more house purchases without costing the state any money. Basil Good, joint owner of Isaacs Hotel and Property Group, and former Dublin City Centre Business Association chairman Paddy Monaghan, believe their proposal is better than the one put forward by the National Asset Management Agency (Nama) last week.
Nama announced plans to sell 5,000 houses as part of a scheme where the agency will guarantee the purchaser against the value of their house falling by up to 20 per cent over five years.
According to Monaghan, his scheme would actually bring in revenue for the exchequer.
Under his proposed Irish Residential Value Protection Scheme (IRPS), where a house is bought for €200,000, the insured risk would be 20 per cent over three years, equal to €40,000.
The government would guarantee up to €16,000. The seller would put €14,800 on deposit with his bank for three years, which would be called on if the house value fell.
This money would be refunded in full plus interest after three years if not called on.
The bank would have to put €5,200 into the scheme if the house value fell.
The purchaser would pay €111 per month for up to three years into a bank account to cover his/her share of the loss if called on, equal to €4,000. This would be fully refunded if not needed after three years.
Monaghan argued that there is a financial incentive and benefit for all four parties to carry out the transaction, despite all four of them sharing some of the potential risk.
"The banks would see more mortgage business and it would help stop house prices from falling, which affects the value of loans they already have," he said. He argued that, while vendors were taking a risk with up to €14,800, they had a better chance of getting a sale through under the scheme.
Monaghan argues that his proposal was better than Nama's because the state was only carrying 40 per cent of the downside risk, instead of all of it under the Nama scheme. He also argued that this scheme could be available for all houses, new and secondhand.
Monaghan and Good have put the proposal to a variety of industry groups, and to environment minister Phil Hogan and finance minister Michael Noonan.

Negative equity protection may simply distort house market - The Irish Times >>>This will lead to a further drop in prices as private vendors drop prices NOW to compete!

2011-11-28T15:02:00.001Z

SHOULD THEY or shouldn’t they? The National Asset Management Agency seems determined to press ahead with its scheme to start selling residential properties with negative equity protection. The first 750 are due to go on sale in the new year and, if things go well, then up to 5,000 properties could be put on the market.
Under the proposal, the agency will absorb any fall in value of the property for five years after the sale up to a maximum of 20 per cent of the sale value. A mortgage based on the full sale price will be arranged through a bank, but will be adjusted after five years based on the market price of the property.
It’s a simple scheme and would seem to be a creative response to the fear holding back a normalisation of the market. It also chimes well with the notion of Nama trying to marry its commercial mandate with some sort of wider social brief.
The Government, however, or parts of it at least, is not convinced of its merits. In particular, the Department of the Environment and former minister of State with responsibility for housing Willie Penrose. They are reported to oppose the scheme on the basis that it represents an intervention in the market and may put a false floor on prices.
This new-found respect for the omnipotence of market forces is understandable given the events of the last decade, but arguably a bit simplistic. The property market at the moment is probably every bit as dysfunctional as it was in 2007, but this time fear has displaced greed.
The case for intervention at this stage on the way down – with prices off by 50 per cent –can be made in much the same way as the case for intervention on the way up long before 2007.
The other point to bear in mind based on recent experience is that if prices really have much further to fall, then the release of 750 properties backed by some sort of negative equity protection scheme will not make much difference.
This, however, leads on to what is the more interesting point: what happens to the market and prices if every seller is forced to offer negative equity protection.
It is not really clear if this point has been thought through, but it seems pretty obvious that if you are trying to sell a property on the same street as Nama and they are offering negative equity protection then you have not really got a hope.
If you want to sell your house you will have to offer something similar and there is at least one similar negative equity product on the market through a specialist financial services company – but to date take-up has been low.
What would be a game changer would be if the three banks that are earmarked to operate the negative equity protection scheme for Nama – Bank of Ireland, AIB and Permanent TSB – were to voluntarily offer the same product or a variant of it to private sellers at reasonable cost. This assumes they are interested in lending in the residential market in the first place. Which is another issue.
It would be even more interesting if the Competition Authority decided to get involved and force them to do so. Which it should do because, viewed from the narrow competition policy perspective, Nama is – with their assistance – abusing both its massive financial fire-power and its market dominance.
The normal competitive oversight of the banking sector has, of course, been set aside under the extraordinary powers the Minister for Finance has taken on to sort out the mess that is the banks. And presumably the authority can be told to back off, should it have the temerity to enter the debate. But as the Government discovered in the recent stand-off with the banks over passing on European Central Bank interest rate cuts, lack of competition can compound problems even in a banking industry as badly broken as the Irish one.
It is an interesting paradox. If you introduce a level playing field in which every vendor must be able to offer negative equity protection – at a reasonable cost to themselves – in order to be able to compete with Nama, then such deals will quickly become the norm.
What have you done then? Have you orchestrated massive – and in theory pointless – intervention in the property market or come up with a radical solution to a market paralysed by fear?

Landlords face rent ban over energy efficiency targets - The Irish Times

2011-11-28T14:57:00.001Z

LANDLORDS WILL be prevented from putting properties up for rent if they fail to meet energy efficiency standards, Minister for Energy Pat Rabbitte has said.
Publishing the national Affordable Energy Strategy yesterday, Mr Rabbitte said he also intended to review fuel allowance schemes to prioritise “colder homes”. However, he said the schemes would not be changed in the upcoming budget.
Some €2 billion had been paid by the State in fuel supports in the last 10 years, while less than €200 million had been spent in bringing houses up to energy efficiency standards. Around 20 per cent of households are experiencing energy poverty but social welfare fuel payments had been “largely ineffective” in tackling the problem, Mr Rabbitte said.
“To be perfectly honest, with some of the money you may as well be throwing it into the furnace because it’s going up the chimney.”
He said the Department of Energy planned to work with energy suppliers, community groups and local authorities to identify areas at risk of energy poverty.
Households would be offered benefit entitlement assessments and advice on energy-efficiency measures. Economies of scale could be achieved through group home upgrade schemes being adopted.
Grants for retrofitting measures will be replaced by a pay-as-you-save scheme where the cost of the installation is factored into regular energy bills.
The extent to which some landlords had allowed the energy standards of properties to deteriorate was “one of the ugly faces of the boom”, Mr Rabbitte said.
“Some landlords care little for energy standards because they’re not the ones paying the heating bills.”
In future landlords would not be able to rent properties without building energy rating (BER) certificates, and by 2020 regulation would remove properties with a rating of E, F and G from the rental market.
The Society of St Vincent de Paul said there were “serious gaps” in the strategy, few firm commitments and a failure to mention the domestic oil sector.
“There is precious little regarding specifics or timescales in terms of future measures in the strategy. Specific and time-bound actions need to be named in order to adequately tackle energy poverty for those we assist in a humane and timely manner,” said John-Mark McCafferty, head of social policy and justice at the society.

See the full gallery on Posterous

Recent Clonmel Shop Lettings

2011-11-28T13:38:00.001Z

Despite the poor (and deteriorating) Irish property market, there are still plenty of transactions in the Commercial Letting sphere.
Once the Landlord is in a position to be realistic with rental levels, there are numerous businesses looking to improve their location or increase the size of their trading area. We are receiving lots of enquiries from start-ups also. If costs can be controlled and a good service/product being offered, then business is possible and viable, even in this challenging environment.
These lettings have all taken place in the last fortnight.
Best of luck to all!

via societyofcharteredsurveyorsireland.newsweaver.com

Moody's does not see floor for Irish house prices yet >>>Nor do I, unfortunately!

2011-11-23T11:41:00.001Z

Irish banks’ asset quality will likely weaken further as mortgage arrears rise and a bottoming out in house prices hasn’t yet occurred, according to credit ratings agency Moody’s.
“We have been highlighting for a couple of years now that we expect mortgage arrears to rise substantially. That now has started to come through,” said Ross Abercromby, a London-based
analyst with Moody’s. “From a capital position, we think the banks have the capital but without doubt asset quality is likely to continue to deteriorate for a while. There doesn’t seem to be any floor yet in house prices.”
While Irish banks have enough capital under Moody’s “current stress scenario,” things could change given “everything going on in the euro area,” Abercromby said.
The banks, which remain highly reliant on central bank funding, are unlikely to regain access to the public debt markets before the sovereign, said Abercromby.
“We can’t really see that happening until the deleveraging process has very much worked its way through,” said Abercromby in a phone interview today. “We think it’d be difficult before
the government’s back in the debt market again.”
In the meantime, banks may continue to be able to issue small amounts of secured debt in private placements. With bank deleveraging plans set to run through 2013 and the government
aiming to be in the market by then “if everything went according to plan, then probably around that time” banks may be able to re-enter the public debt markets, he said.
Moody’s said in a report issued today that the outlook for Ireland’s banking system remains negative citing the banks’ weak funding and liquidity profiles, a very challenging operating environment and the rating agency’s view that profitability will remain weak.
“The substantial weakening in the funding and liquidity profiles of the banking sector is a key driver of the negative banking system outlook,” Moody’s said. “The banks continue to rely on short-term central bank funding from the European Central Bank and in some cases from the Central Bank of Ireland.”
Moody’s said that through its support for the troubled banking sector in recent years, the
government has significantly weakened its own credit profile.
“The banks now have to deal with the implications of this as the government aims to reduce its debt burden and restore its financial flexibility,” it said in a statement.
“In our opinion, the substantial reduction in the government's net spending between 2011-2015 is likely to place considerable pressure on the country's recovery prospects. This will have a significant impact on banks' profitability and is leading to a weakening of already poor asset quality,” it said.
The banks' credit exposures to Irish sovereign debt and to government-guaranteed debt issued by the National Asset Management Agency also contributes to the negative outlook on asset quality, it said.
“However, Moody's views the raising of substantial capital in 2011, mainly from the Irish government, as credit positive. The four domestic banks that are supported by the government now have the capital resources to cope with loan losses anticipated by Moody's stress-case scenario,” it said.

Shatter announcement 'shortly' on upward-only rent reviews - The Irish Times

2011-11-23T11:20:00.001Z

AN ANNOUNCEMENT on the future of Government plans to end upward-only commercial rent reviews in existing leases is to be made “shortly”.
Upward-only rent reviews were banned by the last government and legislation to effectively remove such clauses from existing leases is being examined by the Attorney General. The proposal would mean tenants who have an existing lease and who can demonstrate their rent is higher than the market dictates can appeal to their landlord and ultimately the courts to have a new rent set.
Minister for Justice Alan Shatter has previously indicated he would introduce the required changes as part of the Landlord and Tenant (Business Leases Rent Review) Bill 2011, the heads of which were published this year. Further details of the legislation are due to be published by the end of this month.
Asked about the timetable for the introduction of the changes, a spokesman for Mr Shatter said yesterday the Minister would “make an announcement shortly” on the Government’s intentions.
The comment follows a meeting between members of Retail Excellence Ireland (REI), which represents the State’s retailers, and officials of the Department of the Taoiseach. At the meeting, a number of issues such as VAT and the rent-review legislation were raised in the context of the forthcoming budget. It is understood officials were unable to give a fixed date for the introduction of the necessary legislation to end upward-only rent reviews.
David Fitzsimons of Retail Excellence, who attended the meeting, said it was not understood the legislation had been shelved.
“That would be an incorrect interpretation of what happened,” he said. “We understand the Attorney General is looking at some difficulties and there is a very large legislative programme, but we were not told it had been dropped.”
Mr Shatter’s press spokesman said he was not in a position to expand on the issue other than to say the Minister would make an announcement “shortly”.
Mr Shatter has told the Dáil the legislation was forwarded to the Attorney General “for further examination and development, having regard to the complexities attendant on dealing with existing leases”.
He had received representations from property interests “including the Society of Chartered Surveyors, Jones Lang LaSalle, DKM Economic Consultants, Retail Ireland, Retail Excellence Ireland and the Irish Association of Investment Managers”.

Will VAT hike lure value-seeking shoppers North? - The Irish Times >>>Simple answer...Yes!

2011-11-23T11:16:00.001Z

While the differential in prices will rise, sagging cross-Border trade could be hit by weakening euro
COULD A two percentage point VAT hike in the next Irish budget really propel more shoppers through the doors of retailers in Northern Ireland?
Major high street stores and supermarkets will certainly be hoping for more than a VAT hike south of the Border to boost their takings if latest industry research is anything to go by.
New figures from the British Retail Consortium show there has been a major slump across the board in the number of shoppers crossing thresholds. Jane Bevis, from the Northern Ireland Retail Consortium, says the number of people going into local stores dropped sharply in the three months to October.
Overall, Northern Ireland suffered a 5.5 per cent drop year on year in footfall between August and October. Not only did the number of shoppers drop sharply but there was also a major increase in the number of empty retail premises, Bevis says.
“Obviously trading is tough; Northern Ireland recorded one of the highest vacancy rates in the UK of 12.9 per cent, which is very significant.
“There is evidence that cross-Border trade has fallen off a bit this year. Major retailers and supermarkets have invested heavily in shopping locations close to the Border and obviously they would like to see an uptake in the numbers again.
“I think a VAT rise could cause a major leakage problem for the Irish Government particularly around Border locations,” Bevis says.
She believes that it is not just the large British multiples that might benefit from a rise in VAT rates in the Republic.
“Smaller retailers and shops also enjoy an associated benefit from any increase in footfall – the more shoppers going into shops the greater the benefit for the whole economy.”
But not everyone is convinced. Northern Bank chief economist Angela McGowan acknowledged the proposed VAT rate rise to 23 per cent – as opposed to the current 20 per cent in the North – will “widen the consumption tax” but she said cross-Border trade is heavily influenced by exchange rate movements.
“Although the euro has fallen only very slightly against the pound during of the ongoing sovereign debt crisis, any further weakness in the euro could easily erode the VAT incentive for people in the Republic to shop north of the Border,” McGowan warns. She believes the current economic backdrop is radically different to 2008 and 2009 when the cross-Border shopping boom was at its height.
“The exchange rate is not quite as favourable. The North’s inflation rate is significantly higher and there remains a significant differential in the VAT rate for the tourism sector – the level of VAT tourism in the North is much higher than the new 9 per cent rate for tourism products in the Republic.
“The last differential serves to remove the incentive for southerners to take a weekend shopping break in the North,” McGowan says.
According to Northern Bank, the North’s retail sector has been one of the hardest-hit local sectors in the economic slowdown. In its latest quarterly sectoral forecast report this week, it estimates there will be growth of just 1 per cent next year and possibly 2.3 per cent for 2013.
It also warns that the odds of the North slipping into recession have increased – to 20 per cent – and that risk could rise depending on how the euro crisis plays out.
The tightrope the economy currently walks is never more evident than in Newry, once regularly glancing over its shoulder at the Celtic Tiger and still the capital of cross-Border shopping. The city is successfully nurturing local exporting successes, such as Norbrook Laboratories and First Derivatives while trying to tend to casualties from the construction crash.
Conor Patterson, president of the Newry Chamber of Commerce and Trade, said the city “like the rest of Northern Ireland, Britain, Ireland and Europe” is trying to find a way out of the economic fog.
“We are not focusing on VAT rates or the like in Newry just now. Times are tough in Newry – it has been a tough 11 months so far and, like the rest of Northern Ireland, we are just battling to hold on to business.
“We have some great manufacturing and local tradeable services companies who are very successful exporters so in one sense it is a mixed bag for us.
“We’re focusing on Newry standing on its own merits – whether or not there is a VAT rise in the South.”

Property prices continue to decline - The Irish Times - Doom, gloom, doom, gloom...

2011-11-23T11:14:00.001Z

PROPERTY PRICES continued to decline last month, showing the biggest monthly fall in more than two years.
New data from the Central Statistics Office revealed the average price for residential property declined by 2.2 per cent in October, and dropped by an average of 15.1 per cent over the year.
The pace of decline has accelerated from September, when a fall of 14.3 per cent was recorded.
Home prices in Dublin have been more severely affected, falling by 3.1 per cent last month and 17.5 per cent over the year. House prices in the capital dipped by 3.2 per cent in the month, while apartment prices were 2.3 per cent lower. Over the year, house prices declined 17.1 per cent, while apartments were 21.2 per cent lower compared with the same period in 2010.
The rest of the country saw an overall fall in residential property prices of 2 per cent in October, and 13.8 per cent over the year.
Property prices have now fallen 45 per cent since their peak in early 2007. A recent survey of economists by Reuters predicted that house prices would continue to decline for some time, with a 6 per cent fall in 2012.
“Even allowing for the new initiative by Nama to offer a limited amount of mortgages with protection against price falls, as well as lower interest rates from the European Central Bank, the short-term risks to house prices remain to the downside in our view,” Bloxham economist Alan McQuaid said yesterday. He predicted a fall of about 14 per cent for 2011, with a 9 per cent decline next year before prices start to pick up in 2013.
“Dublin house prices are likely to lead the recovery when it does come given that the capital has the biggest concentration of people. But, the reality is that Ireland’s banks, recently faced with a fresh €24 billion bill to bolster their balance sheets, are currently focused on raising capital and selling assets rather than expanding their mortgage books,” he said.

Property deal slump exceeds Chinese stress test - The Irish Times >>>It's not just Ireland!

2011-11-23T11:12:00.001Z

PROPERTY TRANSACTIONS in China’s largest cities have fallen to dangerously low levels.
According to documents obtained earlier this year by the Financial Times, the China Banking Regulatory Commission (CBRC) ordered domestic banks to weigh the impact of a 30 per cent decline in housing transactions in “stress tests” aimed at determining the health of the Chinese financial system. While Beijing has been trying to rein in sky-high property prices, a China property slump would have a big ripple effect on the global economy. Construction of property accounted for more than 13 per cent of China’s economy last year.
In April, the CBRC told banks to test their loan books against a 50 per cent fall in prices, and also a 30 per cent fall in transaction volumes. In October, however, property transactions fell 39 per cent year on year in China’s 15 biggest cities, according to government data. Nationwide, transactions dropped 11.6 per cent, up from a 7 per cent fall in September.
The fall-off in transactions has affected developers’ cash flows and, in some cases, their ability to repay bank loans.
Rising defaults after a lending surge in 2009 and 2010, much of which ended up in the property sector, were cited by the International Monetary Fund this month as one of the Chinese financial sector’s biggest risks.
The CBRC has not released the results and declined to comment. But one analyst who reviewed the stress-test documents said they did not take into account the impact fewer deals and lower property prices would have on bank collateral.
The weaknesses in the Chinese scenarios echo earlier problems with stress testing in the EU, where regulators underestimated the potential impact of a sovereign debt crisis. – (Copyright The Financial Times Limited 2011)

Nama to put 750 homes on market in new year - The Irish Times

2011-11-23T11:11:00.001Z

THE NATIONAL Asset Management Agency is planning to press ahead with controversial plans to put 750 homes on the market early next year as part of a negative equity protection scheme.
The agency does not need Government approval to proceed, but says it “wants to bring all relevant stakeholders into the process”.
Informed sources say Nama is finalising plans on how the scheme will operate with special mortgages available through three banks, AIB, Bank of Ireland and Permanent TSB.
While it is piloting the sale of 750 homes, the agency has signalled that it would like to sell up to 5,000 homes. The plan created controversy after former minister for housing Willie Penrose expressed concern it was contrary to Government policy and could artificially inflate the property market before it hits the bottom.
The scheme works by waiving 20 per cent of the purchase price of a home if its value continues to fall over the next five years.
For example, if a couple bought a home from the banks via Nama for €200,000, the agency would defer payment of up to 20 per cent – or €40,000 in this instance – of the property’s current value.
The couple would only have to make this payment in five years’ time if the value of the property stays the same or increases. However, if the property is worth less than €200,000, Nama will waive up to €40,000 and repayments would be altered accordingly.
In recent weeks, Mr Penrose wrote to Minister for Finance Michael Noonan warning that providing incentives to buy houses would run counter to Government policies. The housing policy launched earlier this year identified tax incentives for housing as a driver behind the bubble.
While Nama is preparing to launch the scheme early next year, informed sources within Government say it has yet to be signed off. Mr Noonan said the details were being “reviewed” and he would respond to Nama. He noted the scheme had been approved by Nama’s board.
The scheme has attracted criticism. OECD economist Christopher Andre told a conference recently that providing incentives had proved to be “counter-productive” in other countries.
Nama, for its part, insists the scheme is a short-term measure and will not interfere with the market. Officials point out that the move would bring in more taxes. If 5,000 houses or apartments were sold for €200,000 each, this could raise €135 million for the exchequer through VAT receipts.
The most the State could lose, according to Nama, is about €65 million. This is the difference between the amount raised in VAT from the sales and the €200 million which might be waived.
The Construction Industry Federation says it provides a template that could be adopted

Grehans can't pay €300m each and blame NAMA for cheap sale of assets - Independent.ie >>>Agreed! NAMA is a disaster!

2011-11-14T14:32:00.001Z

RAY Grehan has said that he and his brother Danny are not in a position to pay the €300m they each owe NAMA.
The brothers, who moved to the UK six months ago to start another business, will consider all options for the future. This could include filing for bankruptcy in Britain, he said.
The brothers, with addresses at Bateman's Row, Shoreditch, London, and Prince's Park Parade, Hayes, Middlesex, consented to the judgments being entered against them at the Commercial Court by Mr Justice Peter Kelly yesterday.
A barrister for the developers said that given the extremely large sums involved, they were anxious to take legal advice and had decided the "better course" was to consent to judgment despite having "genuine concerns" in relation to the sums sought.
Ray Grehan told the Irish Independent that the brothers were "disappointed" at the outcome.
He was also highly critical of NAMA, saying its actions against them were not in the taxpayers' best interest.
"We will have to take it on the chin, pick ourselves up and carry on," he said.
Now that the Grehans have agreed to the massive judgments against them, NAMA can pursue them to take their assets. The bad bank can seize valuable properties and assets they own.
If they declare bankruptcy in the UK, which is a shorter process than here, NAMA would have a fight on its hands to recover monies from them and would join the other creditors. It could also object to their bankruptcy application and to them being discharged from it after a year.
The brothers gave personal guarantees to lenders for loans taken out by their development company, Glenkerrin Homes, and for personal borrowings that amount to €49m which triggered this court action.
Order
NAMA did not comment on the case yesterday. Earlier this week it secured a court order to have Glenkerrin Homes and another company wound up.
The Grehans must provide a statement of the companies' affairs to the High Court next month. Should they seek bankruptcy in the UK, NAMA will be amongst their creditors.
The brothers had built up a portfolio of properties in Ireland and the UK, including a new tower next to Canary Wharf. Their highest-profile deal in Ireland saw them pay €171m -- a staggering €84m an acre -- for the former Veterinary College in Ballsbridge in 2005.
For many years the Galway-born brothers' Glenkerrin Homes was a major house builder in Ireland.
Mr Grehan said NAMA sold three of its UK properties recently for "€50m less" than it had agreed to sell them. This shows its "lack of expertise" in managing valuable properties for the benefit of taxpayers he said.
"This is a major issue for the Government," Mr Grehan said.
The NAMA claim arose on foot of personal guarantees they gave to AIB for personal and company loans that include Mr Grehan's personal borrowings of €27m and his brother's €22m worth of personal loans.
The Grehans have been on a collision course with NAMA for many months. They initially signed a memorandum of understanding with the agency that would have allowed them to continue running the company with a view to paying off their debts in the longer term.
But tensions emerged when NAMA wanted to appoint former Bank of Scotland executive Harry Slowey as a non-executive chairman of their company and they objected.
NAMA subsequently moved to appoint a receiver to their companies which the Grehans challenged in court. NAMA ultimately won the day.
A barrister for the developers told the court that given the extremely large sums involved, they were anxious to take legal advice and had decided the "better course" was to consent to judgment.
The Grehans previously argued that AIB had loaned substantial monies on short-term facilities in the knowledge they could not be repaid in the short term. It was argued that AIB wanted to lend on short terms so as to avoid the due diligence required for more formal loans and the totality of the relationship with the bank should be examined.
- Siobhan Creaton and Aoife Finneran

Mansfield says group collapsed over bank's failure to honour loan agreement - The Irish Times - Fri, Nov 11, 2011

2011-11-14T14:28:00.001Z

MARY CAROLAN
HOTELIER AND developer Jim Mansfield is opposing Bank of Scotland’s claim for summary judgment for €206 million against him on grounds including that the bank’s failure to honour an alleged agreement to lend him more money to complete the Citywest convention centre led to the collapse of the Mansfield group.
The claim that this “magnificent empire” collapsed because of the bank’s refusal to provide additional funds in 2008, when most of the Mansfield group loans were in “serious and repeated default” with more than €200 million owed to the bank, was “extraordinary” and unsupported, Paul Gallagher SC, for the bank, said.
Mr Mansfield’s case was “utterly fanciful” and among the most “far-fetched” to have come before the Commercial Court, Cian Ferriter SC, also for Bank of Scotland, said.
They were outlining the bank’s case for summary judgment against Mr Mansfield arising from his personal guarantees of debts on various of his companies.
Mr Mansfield, Tasaggart House, Saggart, Co Dublin, represented by Patrick Leonard, contends he has an arguable defence to the bank’s claim requiring the court to refuse summary judgment and allow the matter to go to a full hearing.
The hearing of the bank’s application concluded at the Commercial Court yesterday before Mr Justice Peter Kelly who reserved judgment. The case relates to loans provided by Bank of Scotland to HSS, Jeffel and Park Associates Ltd – of which Mr Mansfield is a director – to buy lands and develop a conference centre, offices, a golf course, residential units and a hotel.
The bank appointed a receiver to HSS in July last year.
Among various claims, Mr Mansfield has alleged business was conducted between him and Bank of Scotland via verbal agreements on funding with the paperwork put in place later.
He was not in court yesterday.

NYT take on Sean Quinn story - Irish Real Estate Tycoon Declares Bankruptcy in Belfast

2011-11-14T14:25:00.001Z

Sean Quinn, an Irish property mogul who parlayed a gravel pit into a sprawling business empire, on Friday declared bankruptcy in a Belfast court, unable to pay the €2.8 billion he owed to a troubled lender that Ireland nationalized in 2009.

By declaring bankruptcy in Northern Ireland, which is part of Britain, Mr. Quinn will have to wait only a year before he can start another business — a more lenient standard than in Ireland, where the waiting period is 12 years.
Mr. Quinn, 64, sharply criticized the Irish bankers who presided over Anglo Irish Bank, whose toxic debts were taken over by a state-backed “bad bank,” the National Asset Management Agency, and transformed into the Irish Bank Resolution Corp. that is now pursuing him for unpaid loans.
“I am certainly not without blame,” he said Friday. “I am not in the business of pointing fingers or making excuses.”
“However,” he added, “recent history has shown that I, like thousands of others in Ireland, incorrectly relied upon the persons who guided Anglo and who wrongfully sought to portray a blue-chip Irish banking stock.”
A court spokesman confirmed that the court had declared him bankrupt, Reuters reported.
Once dubbed the “Mighty Quinn,” Mr. Quinn started a gravel quarry on his father’s farm in 1973 and built it into the Quinn Group, an international conglomerate with interests in cement, plastics and glass, insurance and hospitality. He resigned from the company’s flagship, Quinn Insurance, in 2008 after the insurer was fined for breaching financial rules.
His fall came after he secretly invested in derivatives based on shares in Anglo Irish Bank, a strategy that went sour in 2008. These “contracts for difference,” or C.F.D.’s, enabled Mr. Quinn to bet on the bank’s shares without buying them outright, meaning he could win huge tax-free profits or take enormous losses.
Since then, Mr. Quinn and his family have taken legal action to contest the validity of his bank debts, arguing that the €2.8 billion, or $3.9 billion, was lent for the “illegal purpose” of propping up Anglo’s own share price.
With the bankruptcy filing, Mr. Quinn and the bank intensified their ongoing struggle. The bank is now evaluating Mr. Quinn’s residency and bankruptcy claim in Northern Ireland.
Mr. Quinn said he made the bankruptcy application in Northern Ireland because “I was born, reared and worked all my life in County Fermanagh.”
For years, Mr. Quinn shunned the limelight, living with his wife near the landmark Slieve Russell Hotel, which he owned. But while declaring bankruptcy, Mr. Quinn expressed some regrets about that strategy.
“I have never sought publicity,” he said in his statement. “Sadly, this now seems to have worked very much to my disadvantage, especially when compared with the sophisticated and massively expensive publicity campaign operated for and on behalf of Anglo.”

A version of this article appeared in print on November 12, 2011, in The International Herald Tribune with the headline: Irish Real Estate Tycoon Declares Bankruptcy in Belfast.

via nytimes.com

Fleming gave assets to creditors - The Irish Times - Sat, Nov 12, 2011

2011-11-14T14:22:00.001Z

BARRY O'HALLORAN
FORMER DEVELOPER John Fleming handed over his home and virtually all his personal assets to his creditors in the course of his bankruptcy, which was discharged this week.
The Fleming construction and property group went into liquidation in March 2010 owing just over €1 billion to banks, including the now State-controlled Anglo Irish and AIB, as well as KBC and Bank of Scotland.
Southend County Court in England this week discharged Mr Fleming from bankruptcy. He had been declared bankrupt in November 2010 following proceedings which he himself initiated.
His discharge means he has a clean financial sheet, and creditors such as the Irish banks cannot pursue him further. It also means the National Asset Management Agency (Nama), which took over some of the loans secured against Fleming group assets, cannot pursue him for any shortfall between what it realises from the assets and the loans.
Documents from the case show he handed over most of his personal assets to a group of Irish creditors that had secured judgments against him ranging from €15 million to €26 million. The creditors accepted these assets under terms of the bankruptcy settlement adjudicated by the court.
Assets handed over included his family home in west Cork, a number of properties and personal investments, and a series of family trusts. He was allowed to keep two cars, one for his wife’s use, clothes, valuables and cash, worth €49,000 in total.
The documents show in July 2010 he handed over assets worth €3-€4 million to Tom Kavanagh, liquidator of one of his main group companies, JJ Fleming Holdings, in settlement of a €15 million judgment. The company had unlimited liability and as a shareholder he was responsible for its debts.
Mr Fleming lives in Essex, where he moved in February 2010, which entitled him to apply for bankruptcy in Britain, where the law allows bankrupts to be discharged after one year. The period in the Republic is 12 years.
Mr Fleming’s business was based in Bandon. He began his construction business in 1975. The company worked on projects across industry, energy and pharmaceuticals, and earned a strong reputation for the quality of its work. It ran into trouble after it bought and began developing the Sandyford site, centred around a partially built 14-story block, known as the Sentinel.
Tivway paid €245 million for the 11.3-acre site in Sandyford in early 2006, just as the property boom was reaching its peak. Three years later, Tivway went to the High Court to seek protection from its creditors, and to have an examiner appointed.
The court appointed George Maloney of accounting firm Baker Tilly Ryan Glennon. The rescue plan put forward in late 2009 involved the sale of the building contract business to a new company, Donban, and handing over the Sandyford property to the banks, which could recover value as the market returned

via societyofcharteredsurveyorsireland.newsweaver.com

Property - Society of Chartered Surveyors Ireland Property and Construction News - Mortgages missing key documents

2011-11-14T14:19:00.001Z

Mortgages missing key documents
by Sunday Business Post 13.11.11

Mortgages missing key documents
13 November 2011 by Jon Ihle
More than one in ten mortgages held by the four remaining domestic banks is missing key loan documentation data such as property valuation, location or a property identifier, according to information in a technical paper published last week by the Central Bank.
More than 78,000 mortgages out of 688,000 loans surveyed for the study are missing key bits of documentation, which meant they had to be excluded from the Central Bank's detailed analysis of negative equity and arrears in the Irish mortgage market.
The loans represent €8.2 billion worth of mortgage debt out of nearly €87 billion held by AIB, Bank of Ireland, Permanent TSB and EBS.
The poor data quality could complicate the banks' ability to take security on the loans in the event of a default or voluntary surrender.
It could also give rise to legal challenges from borrowers who are involved in the repossession process or other legal resolutions of their debt problems.
Similar issues with bad loan documentation led to greater haircuts for the banks when Nama transferred billions in assets in 2009 and 2010, while banks in the US have been stopped from pursuing delinquent borrowers where loan data was incomplete or missing.
The gaps were discovered as part of an analysis by Central Bank researchers who were producing a paper for a conference on the Irish mortgage market on October 13. They found 10,094 loans lacked a property identifier, 35,044 had no initial valuation, 15,413 had no valuation date, and 18,628 specified no geographic location.
The news comes as BOI, KBC and PTSB have all reported a spike in arrears due to selected repayment of unsecured debt over mortgage debt in the wake of policy debates over debt forgiveness and a new bankruptcy and non-judicial debt settlement regimes.

The Brits are coming...From the Independent (UK) - Head across the Irish Sea for bargain houses

2011-11-14T14:17:00.001Z

Ireland may be watching its young graduates leave their homes behind in search of work, but many Britons are peering across the Irish Sea looking for a property bargain.

With prices at an all-time low, investors hope that the market has hit the floor and want to snap up cheap homes while they can.
Interest on the online property portal Rightmove Overseas in Irish property began to rise when the debt crisis hit the headlines, but now there are 39,000 searches for Irish property every month, making it the 11th most popular country on the site.
"Property prices in Ireland are at their lowest since 2003, so now is a great time to think about putting money into a renovation project or a newly built property before prices start to rise," says Tom Whale from Rightmove Overseas.
House prices in Ireland have been in a slump for four years and fell by 14.3 per cent in the year to September, according to the Central Statistics Office (CSO), based in Cork.
From their peak in 2007, average house prices are down by 43 per cent. Owners of flats in Dublin have been hit hardest, seeing a 4.8 per cent drop in September prices and a 59 per cent collapse from the highs seen during the Celtic Tiger years.
Prices are keen, but how do you get your hands on an Irish bargain?
"The first thing to say is that the Irish system is almost identical to the English system. Contract law is basically the same so if people have bought property in England it is really the same process," says Ronan O'Driscoll from estate agent Savills Ireland.
"What is different, however, is the extent of the collapse in value, which depending on the category of property, is down about 50 per cent but could be down by as much as 70 per cent from the peak. The official stats say prices have fallen on average by 43 per cent but that is understating the reality."
Mr O'Driscoll says that in a prime Dublin location such as Ballsbridge in the city centre, a typical two-bedroom flat in a quality development costs about €300,000 (£256,000). The peak value for this property was €700,000. In Docklands Dublin, also in the city centre, a similar flat might cost only €200,000, a 60 per cent reduction from its €500,000 peak price tag. Outside of Dublin he points to even bigger bargains to be had with three-bedroom semi-detached houses in a Midlands area such as Mullingar going for as little as €90,000 down from €250,000.
As many Irish homeowners struggle with arrears, banks will be unloading an increasing number of repossessed properties at auction. In April, Ireland held the first multiple-lot auction through auctioneers Allsop Space, and its success paved the way for two even bigger lots this year and another to follow at the end of this month. Residential lots likely to entice overseas buyers include a detached four-bedroom house in Shercock, County Cavan with a reserve price of €50,000.
"We have eight city apartments in Dublin city centre being sold with tenants and the reserve prices – one beds for €92,500 and two beds for €135,000 – are reflecting a 12 per cent rental yield," says Robert Hoban, director of Allsop Space.
Most properties in these three auctions exceeded their reserve prices, but in Allsop's September auction, a ground floor two-bed unit at Shelbourne Park in Dublin had a reserve of €130,000 and went to a buyer from England for exactly that.
Rental yields are by no means guaranteed, however, and there is a risk that rents are artificially inflated as a leftover from the boom time and may well falter at some point. There may be some cheap properties in the more rural areas and in the greater Dublin area but this is because those places were overdeveloped as people were forced to move further away when prices rocketed to unaffordable levels. Those values have now been damaged particularly badly and are attractive but these homes could prove too difficult to rent out today. There are thousands of empty flats clustered around the outer M50 motorway, but in the city centre, where tenants want to live, there is far greater rental potential.
"If people from the UK are considering investing in the Irish market they must be careful where they choose to buy," says Mr O'Driscoll. "Keep in mind the general neighbourhood, and transport links are critical. The nearer to the city centre the better because they don't have the oversupply."
Whether you pick a hot spot or not, property investment is still all about timing. International buyers with an interest in Ireland may be won over by the idea of buying an idyllic seaside property in Cork or a trendy new-build in Dublin on the cheap but there are some significant risks.
First of all, investing in property is an expensive game with stamp duty, surveys and legal fees to factor in so it isn't to be entered into lightly. And because property is so illiquid it should be treated as a long-term investment. The market could be in the doldrums for some time and Irish banks are in no position to lend. Cash buyers looking for a quick sale may find they have no one able to buy.
Above all, British buyers must be aware of the danger of investing in euros. Not only do they have to consider the exchange rate when buying and converting any rental income but also, because if the Irish bail out of the euro and their currency devalues, it could be devastating for anyone holding euro-based investments.
"Investing now presents real risks and is only for the very brave," says Simon Webster from independent financial adviser (IFA) Facts & Figures. "Anyone with any doubt should talk to someone who bought in Spain five years ago and now cannot sell for love nor money – even at a huge discount. With the increasing risk of a complete or partial unwinding of the euro (including Ireland's possible exit and subsequent devaluation of its own currency) I would look for property bargains outside the eurozone."
Expert View
Tom Whale, Rightmove Overseas
"The interest in Irish property from the UK has increased dramatically over the past 12 months, as UK buyers realise that there is a surplus of properties at low prices all over Ireland. UK buyers and investors are purchasing with future price increases in mind, as well as looking to rent out the property to short-term holidaymakers and long-term local residents. With local Irish buyers finding it increasingly difficult to get on to the property ladder, rental yields can be very attractive and there is the potential for a good return on your initial investment."

via independent.co.uk

Time for some home truths as residential wealth plummets - Independent.ie

2011-11-14T14:13:00.001Z

AS a result of the expected 60pc peak-to-trough decline in residential property prices, Irish households are enduring an unprecedented collapse in wealth levels.
Although we don't have the data to detail its composition, it can be safely assumed that first-time buyers who purchased property close to the peak will bear the brunt of this collapse.
As a result, households have now switched to "debt deleveraging" mode. While this is the correct decision from an individual household's point of view, paying down debt en masse is resulting in what can be described as a "balance sheet recession", which will continue to affect household spending and investment levels for some time to come.
There is little by way of historical precedent for the scale of collapse in asset prices, but the performance of the Japanese economy following its collapse in asset prices in 1990 is instructive. The circa 90pc collapse in commercial property prices there created an imbalance between Japanese corporation's assets and liabilities that could only be closed by paying down debt. This created contractionary forces which were the root cause of the weak economic growth that persisted for over a decade. In contrast, Ireland is not in the midst of a corporate balance-sheet recession, but a household one.
The troika largely dictates the policies that Ireland must implement in the coming years. Internally, fiscal consolidation, banking sector deleveraging and private deleveraging are all contractionary forces. For example; banking sector deleveraging/restructuring has already heaped enormous losses on to the Irish taxpayer because private sector creditors have, by and large, been repaid in full. Fiscal consolidation also increases the difficulty for household deleveraging due to hits to disposable income. While Ireland has returned to growth, it is heavily dependent on exports. However, this is now very much under threat as the international economy, particularly the eurozone, heads towards recession in 2012. Ireland has received many plaudits recently, but growth may well fall short of expectations over the coming years, throwing plans off course.
The question, therefore, is whether the current policy direction is the right one and should it change to give Ireland a better chance to grow over the coming years? Given that Ireland continues to have one of the largest budget deficits in the euro area, it would be politically impossible to argue that fiscal consolidation should be slowed. In the case of household deleveraging, the process is largely wealth driven, which is difficult to influence.
Given that the majority of the banking system is still in government control, policies can be implemented to slow the process of deleveraging in this sector. The current policy states that the banking system must reduce its loan-to-deposit ratio (LDR) to 122pc by the end of 2013, through a process of asset sales and deleveraging.
The fact that much of the developed world's banking system is in deleveraging mode means it will be difficult to achieve competitive prices on Irish bank assets. Deleveraging is supposed to focus on "non-core" activities within the Irish economy, but the LDR targets provide perverse incentives for the banks to reduce the size of their loan books. An easing of the LDR targets would remove this incentive but this would require further assistance from the ECB.
Were it not for the insistence of the ECB, costs associated with the banking system would probably have been shared with private sector creditors by way of deeper burden sharing. The Irish Government did not, however, attempt to put the wider European banking system at risk by going down this route. This is particularly frustrating in the context of the proposals to cut Greek sovereign debt by 50pc and the recent payment of Anglo Irish bonds.
Given the continued downward momentum in domestic spending and the international threat of slowdown, that is unlikely to remain the case. Further European assistance in relation to the restructuring of the banking sector is required.
Dermot O'Leary is chief economist with Goodbody Stockbrokers. Maeve Dineen is away.
- Dermot O'Leary

Lowry lobbied minister to save tycoon's empire - Independent.ie

2011-11-03T14:29:00.001Z

INDEPENDENT TD Michael Lowry was involved in a bizarre bid to save Jim Mansfield's Citywest business empire, the Irish Independent has learned.
The Tipperary North deputy lobbied a government minister as part of Mr Mansfield's desperate plan to raise €250m to stop his Citywest hotel going into receivership.
The project to turn a disused shopping centre into a school for students from Saudi Arabia was spearheaded by former Mansfield Group chief executive Sean Whelan. It is thought that Mr Lowry's involvement with the project stems from his network of contacts in Saudi Arabia, which he has developed from travelling to the kingdom in connection with his refrigeration business.
Mr Lowry's involvement will raise questions about the TD's role in the matter.
The Citywest Institute of Education project was announced in February last year by Unicorn PR, the same company hired to promote a planned casino development in Tipperary, also backed by Mr Lowry.
The Saudi Ministry of Higher Education immediately denied it was sending students to the school.
Records obtained from the Department of Education have revealed Mr Lowry's intervention on behalf of the Mansfields in the Saudi school plan, the ultimate collapse of which led to the family's companies being placed under receivership.
Then-minister Batt O'Keeffe's diary shows how he met Mr Lowry at Citywest in October 2009 to discuss the ambitious scheme that would have created almost 300 jobs and seen 750 Saudi students learning English at the proposed school.
Mr O'Keeffe has told the Irish Independent how he "explained quite clearly" to Mr Lowry, the "serious issues" he had with the project.
The former minister said he didn't know why Mr Lowry was involved, adding: ". . . nor did I ask".
On the meeting at Citywest, Mr O'Keeffe said: "I made it quite clear at the time my dissatisfaction in relation to what was being proposed."
He said he didn't feel that the proposal offered diversity or integration for the students or "quality in terms of international education".
Previously released departmental records show how, months after this meeting, Mr O'Keeffe wrote to Mr Whelan at the Mansfield Group in March 2010 saying that his department's position on the Citywest school was being "misrepresented".
He warned: "The proposed model, as constituted . . . has the potential to damage Ireland's reputation as a provider of international education."
Mr Lowry's involvement in the scheme is reminiscent of his lobbying on behalf of businessman Richard Quirke who planned to build a casino, to be known as the Tipperary Venue, near Two-Mile-Borris in his constituency.
Publicity
Valerie O'Reilly of Unicorn PR, who handled public relations for Mr Lowry's 2007 general election campaign as well as media queries for him in the wake of the publishing of the Moriarty Report, was hired to launch the Tipperary Venue and the school at Citywest.
However, both projects have since stalled.
Mr Lowry's involvement in the Saudi school planned by the Mansfield family will raise questions about the TD's role in the matter. Mr Lowry claimed that he was to have received no personal benefit from his involvement in the casino project, arguing that it would bring jobs to his constituency.
It is unclear why he took on his role in the promotion of the Citywest Institute of Education.
Despite attempts since Thursday to contact Mr Lowry, he did not respond to phone calls or questions sent to him by email. Staff at his office said he was away.
The news comes after Jim Mansfield was ordered last month to pay €74m to the National Asset Management Agency on foot of personal guarantees he gave for loans to two companies.
Mr Mansfield, who is in poor health, did not respond to requests for comment by the Irish Independent.
Former Mansfield Group CEO Sean Whelan could not be contacted.
- Cormac McQuinn

Council opens up housing list in 'unpopular' areas - The Irish Times

2011-11-03T14:27:00.001Z

OLIVIA KELLY
COUNCIL HOUSES in areas perceived as unpopular are to be made available for rent to anyone on the Dublin housing waiting list from today under a new Dublin City Council scheme.
Houses in Darndale and Finglas South, areas that have been considered undesirable by qualifying housing applicants, will be advertised to let in newspapers and online under the council’s new “choice-based lettings” initiative.
Until now, local authority housing in Dublin has been allocated through a system of points granted to applicants based on their housing need and length of time on the waiting list.
The city and county are divided into 23 housing areas and applicants can choose a maximum of three areas of preference on their application form. When a house becomes available, the council contacts the person with the highest number of points for that area.
If they reject the property, the council moves to the applicant with the next highest number of points, continuing the process until the house is accepted and let.
However, some properties are repeatedly rejected by qualifying applicants, which means they are left vacant for months.
“Long-term vacant properties are easy to identify and pose a higher risk of being vandalised and, in some cases, can put adjacent houses and families at risk to the same vandals,” the council said. “There is also a loss of revenue to the council.”
It had chosen to run the new scheme on a six-month pilot basis in Finglas South and Darndale on the city’s north side, where some properties could be particularly hard to let, it said. “At present, when vacancies arise in these areas, the allocations process can sometimes be very lengthy.”
A small number of properties will initially be advertised. Anyone on the local authority’s waiting list can register their interest in a property even if they had not already included either area on their list of preferences. Each property will be allocated to the person with the highest list position.
In a briefing to councillors on the scheme, assistant city manager Dick Brady said there may be a perception of antisocial behaviour associated with some of the areas, but “anti-social behaviour is a prevalent issue across all our estates”.
Properties will be advertised from today at dublincity.ie, council offices and local newspapers.

Nama takes control of 48 new properties - Business News, Business - Belfasttelegraph.co.uk

2011-11-03T14:26:00.001Z

An idyllic English country cottage and a creche in Co Cork are among the latest properties to come under the control of the Republic's bad bank.
Nama yesterday revealed it had appointed receivers to 48 new properties, giving it a portfolio of 934 sites which are subject to its enforcement action.
Eighty of the sites are in Northern Ireland - though none in the latest haul is located on this side of the border.
The majority are located in the Irish counties of Clare, Cork, Galway and Sligo while there are also four in the south of England.
Three-bedroomed St Margaret's Cottage in Woodlands Lane in the Surry commuter town of Windlesham has an asking price of £600,000. But with the exception of the quintessentially English residence and a few others, most of the latest properties are not on sale. Nama reveals its links only those properties over which it has appointed receivers, usually when it has not been able to reach a business plan with the original owners of the property.
The institution was set up to cleanse the Irish banking system of toxic loans taken out on properties which plummeted in value during the crash.

via belfasttelegraph.co.uk

Capital values down again in Q3 - The Irish Times

2011-10-26T13:53:00.001+01:00

JACK FAGAN
A NEW STUDY of the Irish commercial property market has confirmed that capital values are still falling as a result of the ongoing recession and, more particularly, because of the Government’s planned intervention in future rent reviews.
The London researcher IPD reported yesterday that capital values fell by another 4.6 per cent in Q3 (quarter three), bringing the overall decline to 64.9 per cent. This is broadly in line with last week’s findings by Jones Lang LaSalle that values have slipped by 64.2 per cent since the peak of the market in September 2007.
The SCS/IPD Ireland Quarterly Property Index also reported that overall returns from the market showed a further fall of 2.3 per cent in the three months up to September.
The continuing decline in consumer spending took its toll on the retail market which saw the steepest falls in capital values last quarter, down 5.2 per cent. Difficulties faced in the occupier market were evidenced by rental values falling a further 4.4 per cent.
Across more specific locations, Grafton Street and unit shops outside Dublin were the hardest hit, with rental values down 5.9 per cent and 6.1 per cent respectively.
Shopping centres also suffered in the past three months with rental values down by 6.3 per cent, most of it resulting from an adjustment in yields.
It was not, however, all bad news as the office and industrial markets showed slight improvements on the previous quarter. Rental values in both cases declined by 3.3 per cent, the smallest quarterly reductions reported since December 2008.
Phil Tily, IPD managing director for the UK and Ireland, said the ongoing European zone crisis, coupled with the challenges in the local economy and the lack of clarity regarding the draft bill for the government’s rent review policy, has continued to unsettle the market which has seen values fall for the 15th consecutive quarter.
“Consumer confidence is clearly dropping away with austerity measures putting a squeeze on disposable incomes, resulting in retails recording their weakest performance figure (-3.2 per cent) for two years.
Hugh Markey of the Society of Chartered Surveyors said the market needed certainty and transparency. They were looking forward to the Government’s draft bill on rent reviews because, while there were elements that may be uncomfortable for landlords and tenants, at least it would bring a degree of closure to the issue.

Squatter told he can stay in NAMA ghost estate home - Independent.ie

2011-10-17T14:06:00.001+01:00

He was on the housing list for five years and, out of desperation to find somewhere to call home, eventually resorted to squatting in one of the thousands of empty houses in ghost estates littering Ireland.
William Tuohy said last night that the house in Church Hill, Tullamore, Co Offaly, wasn't his first choice -- but he is delighted with his new home.
And yesterday a judge allowed him to continue living there when she threw out a case to force Mr Tuohy from his home.
Mr Tuohy (46) had appeared before Tullamore District Court charged with trespassing in the NAMA house.
But after viewing pictures of the improvements he had made to the two-storey home, Judge Catherine Staines dismissed the case, saying there was no evidence that he had intended to commit an offence.
Mr Tuohy, a separated father of seven who is originally from Mountmellick, Co Laois, moved into the house four months ago.
There are around 250 houses in the estate, with a further 20 unfinished. Around 30 of the completed homes are unoccupied.
Mr Tuohy said he had made the house his own.
Previously in rented accommodation, he had to leave following a dispute with the landlord, who he says failed to deal with open sewage flowing in the back garden.
Now his children -- who are aged between eight and 29 -- love to visit on the weekend because they can play in the garden.
"I'm delighted to have somewhere nice for them to come into. It's lovely to have somewhere where you're not worrying about what's going on outside," he said.
He said this particular house wasn't his first choice, but he loved its quiet location at the rear of the housing estate.
"I picked a house at the very front but unfortunately, when I went to move into it, somebody had broken in and robbed the tanks out of it and the houses all along that block," he said yesterday.
He said he was frank with gardai when they visited him.
"I explained straight out what I was doing. I told them I was claiming squatters' rights using adverse possession to the property," he said.
Mr Tuohy is unemployed and receives a disability pension because of depression. He also admits to previous drug problems. He said he enjoyed doing up the house because it kept him busy.
Inspect
He said it was "no problem" to get it connected to the ESB mains after paying a local company €250 to inspect and confirm the house was wired properly.
There is a gas connection but he cannot afford gas so he relies on solid fuel for heat.
Michael Duignan Auctioneers was handling the sale of the properties, which were priced up to €300,000.
Speaking after the judge dismissed the garda prosecution for trespass, Mr Tuohy, who has been on the housing list in Tullamore for five years, said he tried all the vacant properties in the estate until he found one with an open door.
The house had a fitted cherrywood kitchen and bathroom and he painted the walls, put down flooring and dealt with a serious mould problem that developed while the house was vacant for three years.
There were no electrical appliances so he bought his own but said much of the furniture had been donated by family and friends. He said he had paid around €2,000 on the house and that the money had made it "very habitable".
The case was dismissed because, after seeing photographs of his new home, the judge said there was no evidence he had intended to commit an offence.
"I was kind of surprised when she went with me -- the guards seemed to have everything wrapped up. As far as I was concerned it didn't look good.
"She might have put me out of the house but I knew she was going to be fair with me, maybe give me a month or six weeks to get a place."
Solicitor John Hughes explained that his client had been left to his own devices in the house and, as they had recently learned the name of the owner, who is in NAMA, Mr Tuohy would like to pay rent and arrears.
He described Church View as "effectively a ghost estate, part completed, part unoccupied and unfinished, with around 30 vacant houses".
Mr Tuohy said he planned to stay in the property.
"I just want a place of my own, somewhere to bring my kids at the end of the week, with no headaches.
"I can't understand why somebody like the council can't take over these properties and rent them out to people. It's a shame. There are so many people on the housing list."
- Claire O'Brien

Anglo turns screw on professionals in debt - Independent.ie

2011-10-17T12:56:00.001+01:00

ANGLO Irish Bank has upped the ante in its efforts to recover millions of euro it loaned to members of Ireland's professional class during the boom, with threats of judgments and action by county sheriffs now routinely being sent out, even where repayment agreements are being adhered to by borrowers.
The Sunday Independent has seen copies of correspondence from the bank's solicitors sent to one businessman, where the immediate repayment of a loan of over €1m has been demanded.
Expressing surprise at the demands now being made, the businessman explained how he and others within his professional social circle who had borrowed from Anglo and had -- with the express agreement of the bank itself -- been making interest-only payments on time and without fail each month.
"I looked for the loan on a Wednesday and they gave me the full amount on the Friday," he said.
"It has been interest-only for years now and I've made the payments every month.
"I could understand if they had come to me and said it was time to start repaying on the principal. But now they're looking for the whole lot in one go."
Asked for comment on this and other cases where Anglo Irish Bank -- which is now known by its new name of the Irish Bank Resolution Corporation (IBRC) -- is seeking an immediate and full repayment of loans, a spokeswoman for the bank said: "The bank will not comment on the specific circumstances of individual borrowers.
"The IBRC works collaboratively and on a case-by- case basis with borrowers and is in a constant process of engagement with each individual client."
Separately, sources at Anglo attempted to play down the concerns of the businessman in relation to the bank's move against him and others within his circle, saying that there hadn't been any recent or specific increase in correspondence with borrowers "above and beyond the normal level of engagement".
But whatever letters Anglo might be sending to its clients promising judgments and visits from the county sheriff, the experience of the sheriff himself suggests that there is less and less to be gained from such action as the recession drags on.
Speaking to the Sunday Independent this weekend, Dublin County Sheriff John FitzPatrick said there were now far fewer demands being made of his office from the banks to seize assets from delinquent borrowers.
"I think they have found that there isn't much point," he said. "When all of this first blew up, we were getting massive stuff in from banks.
"I had one for €10m against one man and one for €23m against another, but that has died now. The guy that I went to for the €23m, he owed something like €150m. We took his Range Rover and his Jaguar, but sure that's only a drop in the ocean.
"Then we had the likes of Breifne O'Brien, who owed millions. We got something like €250,000. I'd say the banks have copped on and thought: 'What's the point of all this?'"
Mr Fitzpatrick said many of the valuables that his office might look to seize when executing a court order were often already gone from a debtor's premises by the time he and his men showed up.
"You can go in and get a whole heap of valuable paintings, but a lot of this stuff had disappeared. By the time the banks had gone to court and got the order, the stuff had disappeared," he added.
- RONALD QUINLAN

Property owner jailed for changing locks on receiver-appointed house | Irish Examiner

2011-10-17T11:55:00.001+01:00

A PROPERTY owner has been jailed for two weeks after a High Court judge found the man had breached orders not to interfere with a receiver appointed over three of his premises.
Seamus Killoran, who was jailed in August for being in contempt of court but released 24 hours later, was yesterday sent back to Mountjoy prison by Mr Justice Roderick Murphy after the judge found he had breached undertakings and a court order in respect of a house at Coolcarrigh, Coill Dubh, Naas, Co Kildare.
The court was told that earlier this month Killoran re-entered the property and changed the locks, preventing the bank-appointed receiver Fergus Lowe from accessing the house, which he intends to put up for sale.
The judge held that Killoran, who was not legally represented and refused to answer any questions put to him by the judge, was in clear contempt of orders and undertaking not to interfere with the property.
During the proceedings Killoran was asked a number of questions by the judge. However, he replied several times "civil or criminal?" He also told the judge: "I will accept no fines, penalties or jail time."
Killoran was sent to prison for two weeks, but the judge added that Killoran could be released anytime before then if he was prepared to purge his contempt and comply.
Last August Killoran was released after spending a night in Mountjoy prison after agreeing to comply with a High Court order not to interfere with the work being carried out by Lowe.
William Abrahamson, for Mr Lowe, said that earlier this month Killoran took possession of the premises in Naas, in spite of the undertakings.
Following the High Court proceedings in August, Killoran was given time to remove his personal belongings from the house.
A security officer employed by the receiver said locks had been glued, and then changed and windows blacked out in the house, counsel added.
Counsel said the receiver was "reluctantly" seeking the order but had "no option" as Killoran blatantly refused to comply.
In December 2010, Dankse Bank, trading as NIB, appointed Mr Lowe as receiver to Killoran’s houses at Ardilaun Green, Ballymahon Road, Mullingar, Co Westmeath; Carra Grove, Mullingar; and the property at Naas.
Last July, Mr Lowe brought proceedings against Killoran after security staff Mr Lowe had hired discovered Killoran had changed the locks and barricaded himself into the Naas property.

Banks turn up the pressure on buy-to-let investors | The Post

2011-10-17T11:54:00.001+01:00

A number of banks are preparing to put the squeeze on buy-to-let investors by refusing to allow any further extensions of interest-only periods on their mortgages.
Up to now, thousands of buy-to-let mortgage holders have been benefitting from interest only periods on their loans even after they were due to revert to paying down some of the principal. Banks have, in many cases, simply extended the interest-only payment period as a way of keeping the mortgages above water.
However, sources in two banks with sizeable buy-to-let portfolios told The Sunday Business Post that they were set to adopt a tougher stance. ‘‘The problem is that, for some of them, they are actually doing okay and they could afford to switch to paying principal and interest," said one banker. ‘‘But others are badly hit and will seriously struggle to move on to paying down the principal. We now have to tackle this and establish who is who."
This could see an increase in repossessions of buy-to-let properties, something which is a lot less sensitive than re-possessions of family homes. It could also see tough negotiations opening up between investors who have mortgages on rental properties and their banks.
‘‘Where the LTVs [loan-to-value ratio] are seriously out, we will have to sit down and negotiate and come to some arrangements," another banker said last week.
Around 25 per cent of the residential mortgage loan book is buy-to-let. It is likely that mortgage holders in this category may be a lot less willing to try everything they can to repay the mortgages, because they are investment properties rather than the family home.
So a decision to start addressing this problem will lead to more repossessions.
The bank code of conduct on forbearance currently applies to family homes and not investment properties.
The planned move by the banks follows several comments by Central Bank governor Patrick Honohan about the need for banks to speed up their response to the mortgage arrears crisis

via thepost.ie

Regulation of mortgage brokers to be reviewed | Irish Examiner. Mad stuff!!

2011-10-17T11:39:00.001+01:00

THE Government is to examine laws regulating mortgage brokers after the case of a debt-ridden family affected by suicide was raised in the Dáil.
Junior Finance Minister Brian Hayes made the vow yesterday. The Irish Examiner earlier this week highlighted the story of Jennifer (not her real name), whose husband took his own life. She now faces the loss of the family home.
Fine Gael TD Paschal Donohue yesterday raised the plight of the widow and her late husband, who had secured a €300,000 remortgage loan through a broker despite being on social welfare, facing arrears and only having a small income from a fruit and veg stall.
Brokers Irish Mortgage Corporation (IMC) said the couple had a joint income of €100,000 when they sought the loan at the height of the boom in 2007.
Mr Donohue said: "This adjournment motion is prompted minister by a desperately sad case which I became involved in last week which received some coverage in the Irish Examiner.
"I have looked at the chain of events leading up to this sad event and at the financial transactions which led to the creation of that environment. There is no doubt but that mistakes were made by many parties along the way, including, tragically, the family involved."
After learning of Jennifer’s case, Mr Donohue said he was concerned about the role of mortgage brokers and financial intermediaries.
"The family concerned received a mortgage, the application form for which contained no evidence of a bank account. Also, the person granted the mortgage did not have life assurance, was not able to produce evidence of income and had already built up mortgage arrears from a previous mortgage."
The TD said regulation of mortgage brokers needed to be tightened, to protect vulnerable borrowers and ensure there was a clear paper trail between borrower, intermediary and lender.
The lender involved, Springboard Mortgages, has threatened Jennifer and her family with repossession of the home as she struggles to meet mortgage repayments.
The Central Bank is probing sales practices used by IMC, the broker which arranged the €300,000 loan.
Junior Minister Brian Hayes said the Central Bank had a registry of over 2,000 mortgage brokers. He said there may be questions about the supervision of brokers and the complaints system against them.
"If the Central Bank believe that it is necessary to change the law to give additional consumer protection as the deputy’s outlined, I think the Government would be clearly open to that," he added.
Mr Donohue said that others in the housing and mortgage sector had come across similar difficulties to the case of Jennifer’s family.
Mr Hayes said he expected direction on overhauling the laws for mortgage brokers to come from Europe and the issue was one which the Polish presidency of the EU was focusing on.

The day of reckoning beckons for investors - Independent.ie

2011-10-17T11:14:00.001+01:00

For many property investors who bought in the noughties the day of reckoning is nigh -- October 31 to be precise. On the other hand for investors who may be tempted to try their hand for the first time, a new era of opportunity may be about to dawn.
By October 31 existing property investors will have to pay preliminary taxes for the current year and for the first time ever this will include the payment of the universal social charge (USC) on rental income.
Those self-employed who are earning more than €100,000 from various income sources could be paying as much as 10pc on rental income.
For those those earning less than €100,000 and those on PAYE, the rate of USC ranges between 2pc and 7pc.
It's understandable in the current climate that there's not a lot of sympathy for investors who are still earning more than €100,000.
There's even less public sympathy for investors who availed of capital allowances such as Section 23 tax incentives to avoid paying tax on rental income. But for many of these investors the tax allowances have expired. For those still with allowances they are now caught by the USC from which investors cannot be sheltered by the use of such tax-incentive schemes.
However, the problems being faced by investors are not confined to these property owners. It may also impact on many young families, especially those who want to sell their apartments in order to move into a house which can cater for a growing family.
Apartment owners who bought in the boom have seen their values fall by up to 60pc in many cases, so both investors and owner occupiers are experiencing the pain of negative equity.
Investors have also been deterred from selling where the value of their property is now worth less than the amount of their loans. For many homeowners negative equity will not really prove painful until they have to move and suffer the loss.
But for investors the USC may well mean that they will suffer the pain this month.
Up to now rather than sell in a falling market, some investors have raided their nest eggs to cover ongoing costs such as mortgage repayments, management fees, insurance, maintenance etc. On October 31 when they are faced with an extra tax increase they may say enough is enough.
In addition many pay income tax at 41pc on a whack of rental income even if their mortgage repayments exceed the rents. Now many will find that the USC is adding a further 10pc to this tax, even when their rents are not covering their repayments, never mind their taxes.
Recently their costs have risen due to higher interest rates, tenancy registration fees etc. They are also facing a new property tax in the forthcoming budget. Furthermore many may face rent reductions when the Government introduces measures to reduce the €500m it is paying on rent subsidies.
So an increasing number of those investors who are paying their mortgages out of their nest eggs will now be asking themselves: "Why should I pay these extra taxes in order to subsidise tenants?
"Would I not be better off selling off the property to pay off as much as possible of the bank loan? If I still have to pay from my savings at least it goes to reduce my debt rather than to pay taxes."
Those investors who find that their finances force them to answer yes to this question may sell their properties and thus add to the supply of properties on the market.
Such sales could help home buyers who want to take their first step on the property ladder at really affordable prices. However, it will not help those families who feel trapped in small homes they want to sell but can't afford the move. Falling apartment values will exacerbate the problems of negative equity for families wanting to trade up because apartment prices are likely to continue to be depressed while houses prices stabilise.
Sadly the prospect of NAMA's price guarantee for NAMA properties could add to the selling difficulties for both investors and families in small homes.
Those most likely to benefit are those who kept their powder dry during the boom and now have the resources to snap up bargains.
Even if the Government manages to reduce rent levels, it looks like new investors will aim to buy properties which offer yields of 10pc plus as has been reflected in recent auction deals.

Almost 19,000 completed new properties lying empty - Independent.ie

2011-10-17T11:08:00.001+01:00

THE Department of the Environment revealed this week that almost 19,000 completed new homes remain unsold in so-called ghost estates across the country -- but the number is falling.
The new statistics show almost 4,500 houses and apartments have been occupied in the last year, but 18,638 units lie empty.
The National Housing Survey also reported that more than 800 developments have been finished since the last survey in 2010, with works funded by bank receivers, NAMA, local authorities and developers.
Meanwhile, there are about 100,000 households on the local authority housing waiting list, up from 58,000 in 2008.
However, NAMA has no specific legal obligation to help resolve the social housing problem. And a spokesman for Nama said it doesn't own properties. "NAMA owns loans which are secured against properties, which includes residential properties in ghost estates," he said.
"There are developers, there are borrowers, there are companies who own these properties who have loans that are now in NAMA.
"We are working with the Department of the Environment and Local Government to identify units which might be used for social housing."
A spokesman for the Department of the Environment added: "We can't come along and take what we don't own."
- Mark O'Regan

Wallace loan to block ACC getting his home - Independent.ie

2011-10-17T10:52:00.001+01:00

WEXFORD TD Mick Wallace may have given personal guarantees on "just about everything", but the ACC Bank is wasting its time if it thinks it can take his family home or even the vineyard in Italy as it seeks to recover the €19m for which it was granted judgement in the High Court last Monday.
For however aggressive it decides to be in its efforts to get its millions back, a mortgage Mr Wallace took with the AIB in 2004 on his home in Clontarf effectively blocks the ACC from trying to take possession of the property.
And any possible designs that the Dutch-owned lender might have in relation to the Wexford TD's beloved vineyard in Cortemelia meanwhile won't do it any good either, given that he only recently sold it to his own brother.
Commenting on the deal in an interview earlier this year, Mr Wallace said: "I had to sell it to a creditor -- who happens to be my brother. I owed him €550,000 and I sold him the vineyard. It's not something I wanted to do but he was going to get nothing for the €550,000 worth of material that I had got from him for construction work.
"I still go down there [to the vineyard]. But I don't enjoy the fact that I had to sell it and I did offer it to other creditors who didn't want it. They were holding out for the hope that they'd get money and hopefully they will."
But as much as that disclosure might stick in the craw of the debt recovery unit at the ACC, the Independent TD has insisted that the sale of the vineyard was all above board. To prove his point, Mr Wallace revealed how the deal's validity had been already been accepted by the Revenue Commissioners.
While the precise timing of the Italian transaction is not known, it must have taken place at some point during the period between an interview the independent TD gave on The Late Late Show in November 2009 and the newspaper interview last March in which he revealed its sale.
Asked specifically by Ryan Tubridy in 2009 if he still had his Italian vineyard, Mr Wallace said that he did.
Asked in the same interview if the banks in Ireland could potentially take his vineyard in the light of his financial situation, he said: "The banks can take just about everything. I haven't got a whole lot of different companies, it's very much all tied up together and because there's personal guarantees involved, any stuff that is not in the company name but personally owned by me is also caught in the net."
Several efforts by the Sunday Independent to reach Mr Wallace by phone to establish the exact date of the vineyard's sale proved to be unsuccessful.
But while the Italian property is now beyond the reach of creditors by virtue of the fact that it is no longer his, Mr Wallace's Dublin home could yet be under threat should AIB decide to follow the lead of ACC and demand the immediate repayment of monies it loaned to him for development during the boom years.
As holders of the one and only mortgage charge over the property, AIB would not be impeded in its efforts to take possession of the house in the event that Mr Wallace provided personal guarantees for his development loans with them.
Apart from the €19m for which the ACC has secured judgement, Mr Wallace has outstanding loans of some €21m with the AIB, the Ulster Bank and Bank of Scotland (Ireland).
It remains to be seen what these institutions will do to recover their money given Mr Wallace's admission in the case of his ACC debt that he could not pay it back.
"I'm not in a very good position but I accept the judgement of the court. I borrowed the money, I can't pay it back so that's my problem," he said as he left the High Court last Monday.
Speaking on RTE radio later that same day, Mr Wallace conceded that he could yet be bankrupted by the ACC, an outcome that would force him to give up his Dail seat under the rules set down by the 1992 Electoral Act, which forbids bankrupts from holding office.
The final breakdown in relations between the sides came last July, when the bank launched debt-collection proceedings in the High Court, having appointed receivers to three main assets in his construction group, M & J Wallace just three months earlier.
Speaking at the time, Mr Wallace claimed ACC moved in the receivers after giving him just 24 hours to repay €18.5m.
Upon the appointment of the receivers, Mr Wallace lost control of a large number of properties in his empire, including the restaurants in Dublin's Italian Quarter.
Mr Wallace -- who topped the poll in Wexford in last February's General Election -- is a director of more than a dozen companies that were worth €70m at the height of the boom.
Those companies and the assets underpinning them have since plummeted in value to €20m -- or just €1m more than the €19m Mr Wallace owes ACC alone.
- RONALD QUINLAN

Kimpton Vale property firm faces wind-up petition at High Court - The Irish Times

2011-10-17T10:51:00.001+01:00

COLM KEENA, Public Affairs Correspondent
A PETITION for the winding up of Kimpton Vale, a loss-making property company with loans that have been moved to the National Asset Management Agency, is to be made to the High Court next Monday.
The petition is to be made by Talsar Developments Ltd, a creditor of Kimpton. Talsar is a Dublin building company owned by Derek Wray, of Terenure, Dublin, and Neal Thompson, of Clane, Co Kildare.
Kimpton is owned by Laurence Keegan, with an address at Carpenterstown Road, Castleknock, Dublin. He and his wife Mairead are the company’s directors.
The latest filed accounts for the company are for the year to May 20th, 2009, and show that work worth €5.3 million was completed that year on residential property for its owner and his children.
The accounts for the company show it “raised an invoice of €1 million including VAT to directors Laurence and Mairead Keegan regarding the construction of a residential property” during the year.
The accounts do not give any information in relation to payments arising from the invoice.
The accounts also state the company was contracted to build residential units for the Kimpton Vale Partnership and that an invoice of €4.32 million was raised on their construction and fit out.
The Keegans are members of the partnership, according to Companies Office filings, as are Sarah and Sean Keegan, also with addresses in Castleknock.
The accounts say transactions with interested parties were conducted on an arm’s-length basis. They show Kimpton Vale made a pretax loss of €873,549 and had accumulated losses of €3.89 million at year’s end. Bank borrowings were €8 million. Company filings show mortgages with AIB.
Mr Keegan was restricted from operating as a director by the High Court in January 2004, arising out of his activities with Torose Construction Ltd. The share capital of Kimpton is set at the threshold that allows directors restricted under Section 150 of the Companies Act to act as directors.
In 2002 Torose Construction, which built developments at Castleknock and Templeogue, made a €6.93 million settlement with the Revenue.
Mr Keegan was named in 2009 as having invested €4 million via Davy in developer Bernard McNamara’s stake in the Irish Glass Bottle site, in Ringsend, Dublin.

€10.5m required to remove pyrite from Ballymun homes, report shows - The Irish Times

2011-10-17T10:50:00.001+01:00

OLIVIA KELLY
UPWARDS OF €10.5 million will have to be spent to remove the defective building material pyrite from newly built Ballymun regeneration homes, a Dublin City Council report has revealed.
Three developments of a total of 274 houses and apartments built to rehouse the tenants of the Ballymun flats have been found to have “pyrite problems”, the council said in a report submitted to the Oireachtas last week.
Remedial work to fix the problem in the largest of these developments, an estate of 124 housing units known as Sillogue 4, will cost approximately €10.5 million. Further tests are needed on the other two developments, Carton Terrace, which has 94 units, and Owensilla, which has 58 units, to determine the extent of the work needed and the costs involved, the council said.
The final costs of fixing the Ballymun pyrite problems are likely to be several multiples of what the council is facing to remove pyrite from its other social housing developments.
Pyrite, sometimes known as fool’s gold, is a mineral which naturally occurs in stone, but when exposed to air or water becomes unstable and can cause structural damage, including cracking and buckling of walls and floors, when used as a building material.
The presence of pyrite in the council’s housing stock was first confirmed in 2008 in the Avila Park Traveller housing scheme in Finglas. Six houses built in 2005 had shown “unusual defects” within a year of completion the council said, which were ultimately attributed to pyrite.
A subsequent review of the council’s recently built housing stock revealed excessive levels of pyrite in Clancarthy Court, a development of 20 senior citizens’ flats in Donnycarney; a complex of 69 units in Ballybough; a community and childcare facility in Ballymun and the three Ballymun housing developments.
Work to remove pyrite and repair the six Avila houses will cost about €663,000 and is due to begin this month. Work to repair the Clancarthy Court flats has already started and is expected to cost €700,000, the report said.
The developers of the Ballymun community facility, James Elliott Construction Ltd (JEC), won a High Court case against Irish Asphalt, which owned the Bay Lane quarry near Blanchardstown which supplied the pyrite-contaminated material. Irish Asphalt has sought permission to appeal to the Supreme Court.
Since the court action was initiated pyrite was discovered in the Ballymun housing estates, the council said. While the pyrite was discovered in Sillogue before the houses were brought into use, Carton Terrace and Owensilla are fully occupied.
Ballymun Regeneration Ltd is considering legal action against Irish Asphalt and “a decision is imminent”, the council said. The costs of the work will be funded by the council and the developers of the housing, the council said.

Receiver aims to recoup €6m from retail network - Commercial Property - Independent.ie

2011-10-10T15:11:00.001+01:00

Eight properties linked to a south-east retail store chain, are valued at more than €6m, by a receiver who is planning to either sell or lease them.
Estate agent Neil Bannon is receiver to the properties linked to Byrne's World of Wonder chain which sold toys, books and cards.
Darren Peavoy of Bannon says that four properties located on high streeta in Wexford Town, Dungarvan, Gorey and Carlow could be available at an average rent of €100,000, or a an average price of €1m. each.
"With over 60,000 sq ft of retail space coming available in the portfolio we are in discussions with potential occupiers who are looking at gaining strong representation in the south-east in one acquisition," he said. The properties range in size from 743sqm to 1,580sqm.
A fifth property is a 1,300sqm unit in the Clonard Retail Park near Wexford town which could also fetch almost €1m.
Two of the units are town centre retail outlets in Enniscorthy which are currently let to tenants. The eighth property is a warehouse building in Enniscorthy.
Mr Peavoy says the high-profile locations in strong trading towns has already generated interest in all of the properties.
Byrne's World of Wonder had been in business for 35 years and at the height of the boom operated 21 stores throughout Leinster and Co Waterford, employing 350 people. In 2006, it achieved a turnover of €50m. However the recession and falling consumer spending forced it to close its two Dublin stores, at Coolock and Liffey Valley, in 2009 and seven more stores in February 2010. It continued to close stores up to the appointment of Neil Hughes of accountants Hughes Blake as receiver to the business last August.
Mr Hughes continues to trade in four stores, three in Enniscorthy and one in Wexford. He also closed a Kilkenny store which, together with one of the Enniscorthy stores, is not included in the Bannon receivership. Mr Hughes is believed to be endeavouring to do a deal to transfer ownership of some of the stores.
Mr Bannon was appointed by Bank of Scotland Ireland.
- Donal Buckley Commercial Property Editor

Here's a tip: if you want to make a sale - try harder - The Irish Times

2011-10-10T15:09:00.001+01:00

Despite the sluggish market, some savvy sellers are finding buyers for their homes, writes ALANNA GALLAGHER
IT MAY BE a buyer’s market but some properties are shifting, with a few even garnering competitive bids. What are sellers doing to earn that coveted “sold” sign? Homeowners who have been liberated from the “for sale” trenches have some tips.
According to the CSO’s Residential Property Price Index, property prices are down 43 per cent nationally from Septembner 2007, but property manager Deirdre Walshe says there are buyers out there,.
The market is now is a bit like speed dating,” says Walshe, who once worked in advertising sales. “Your property is competing against thousands of other properties out there so you need to try harder.”
She manages her family’s portfolio of 34 properties. This year shesold a two-bedroom apartment and she has put her own family home up for sale.
“You need an agent with experience in your area and in your property type,” Walshe says. Research what properties have sold in the past, for what price, and who sold them. You can also look at the properties that are on the market at present and what their guide price is and again who is the sales agent. If an agent is getting results in your area then they have their ear the ground as to what buyers think of the area, what type of properties buyers are looking for and, more importantly, what kind of price you can expect.”
She employed Owen Reilly to sell her two-bedroom apartment in Temple Bar. It had an asking price of €195,000 and recently sold for €189,000. Her family home in Sandymount, which has just come onto the market, is with agents Sherry Fitzgerald.
Pricing the property to sell is crucial to clinching a deal, she says. “Sellers have to be realistic. The market will tell you what your property is worth. You have to listen to the market. And in this market you should be willing to accept an offer of between five and 10 per cent less than the asking price.”
She also recommends that you are flexible about viewings. “You don’t know when your buyer might appear and in this market you need to be as amenable as possible.”
Prionsais O’Neirigh has sold two properties in the past 18 months. A three-bedroom investment property in Rathfarnham went to the market last August at €395,000 and sold 14 weeks later for €230,000.
The family home in Carrickmines went to market in August of last year at €495,000. A three-bedroom semi starter home, it was purchased in 2002 for €360,000.
The house took eight months to sell. For five of those months he increased the number of viewings from Saturdays only to viewings every Tuesday, Thursday and Saturday.
“It’s a falling market,” says O’Neirigh, “so reduce your price to sell”. He lowered his Carrickmines house price four times to catch the market. He also changed agents.
Even with all this effort he thinks that the buyer actually first saw the house at a family party. The house sold for €340,000, 31 per cent below the original asking price, yet O’Neirigh is delighted with the result “because property prices in the area are still falling in value”.
He didn’t get back the €70,000 he had spent installing a new kitchen, new bathroom and new windows, but he was able to pay off the mortgage.
Retired quantity surveyor George Walsh, who sold his house in Tudor Lawns in Leopardstown in July, agrees with the recommendation to reduce the asking price.
“Purchasers need to feel theyre getting something off the price,” he explains. He discounted his home by €50,000 – that’s 10per cent – and it sold within two months.
He also recommends sellers get a surveyor’s report done on their property before they put it on the market because “some buyers are using the findings of their surveyors report to try and further reduce the property price. If you already have a survey of your own you can allay their concerns”.
Reports of horse trading are rife. One Dublin barrister who sold his three-bedroom house in Sandymount last July had three bidders within its asking price of €525,000.
He went with the highest bidder who then delayed closing contracts. The buyer’s solicitor came back weeks later saying that there was an issue with the title. The barrister didn’t believe the issue raised was genuine and felt that this was confirmed when the purchaser sought a reduction in the price. The house was eventually to one of the under-bidders.
Under-bidders who are cash buyers are not beholden to the bank and are able to move quickly – something to bear in mind in this market, says Tom McLoughlin who sold a large period county house outside Kilcock in Co Kildare.
The house, 511sq mts (5,500sq ft) in size was put up for sale in June 2009 with an asking price of €1.4 million. The price was reduced to €1.1 million and after almost two years on the market sold to a cash buyer for €845,000. “We had several offers but most couldn’t come up with the money.”
If you are lucky enough to find yourself with a number of buyers bidding close to your asking price, one recommendation is to issue contracts to each bidder and tell them that whoever comes back first with signed contracts gets the house.
Emer and Julian Pollard built a three-bedroom bungalow to the rear of their property in Greystones seven years ago. The house was originally built for their daughter. It was rented out but the non principal residence tax and looming property taxes prompted them to put it up for sale. It went to market in March this year with an asking price of €450,000. They instructed their solicitor to start working on the documentation as soon as the house had been valued by their agent. Several parties were interested in the property and competitive bidding saw her get in excess of the asking price. The sale closed within two months.
Communication is crucial if you want to keep all parties happy, says Anne Marie Lynam, who only put her house up for sale because she fell in love with another, a country property in Co Westmeath that she saw advertised in this paper. “I will buy this house if you can sell mine,” she recalls telling the estate agent after viewing it.
One valuation later, her four-bedroom detached town house in Athlone went to market with an asking price of €295,000. That was in September 2010. By November 3rd the sale was agreed for 25 per cent less than the asking price.
The house she bought had tenants that needed to be given notice to quit. She had to wait until March of this year to move in. This slowed down the sale proceedings on her own house as she didn’t want to move out and rent in the interim. This wasn’t a problem because she kept in constant communication with her agent to update her and the vendor.
“Don’t think you’ll close in six weeks,” says Deirdre. “Set your sights on the process taking six months. And get your paperwork in order before you go to sale. That will speed up the process from your side.”
When you go to market you have five or six weeks and then you will lose momentum, she says. “If it doesn’t work, go back to the drawing board. Ask yourself the following questions: Is it the price? Is it clean enough? Most buyers can’t see past a mess.”
Buyers these days are more discerning, agrees O’Neirigh. “They’re even taking the house- hunting search beyond the property pages and websites and driving around areas, noting boards as they go up. A lot of houses are selling very quietly this way.”
Keep your tenants
Do not leave an investment property sitting vacant while it is up for sale, cautions Deirdre Walshe. “The sale may take up to a year to go through so explain the situation to the tenants and reduce their rent to keep them in situ. A property with tenants is not going to be kept in spotless show house condition but an investor will see past this.”
Four properties that have recently sold
Number 16 St Kevin’s Park, Dartry, Dublin 6, sold recently for a figure substantially over the quoting price, according to Keith Lowe of agent DNG. It had been seeking €1.35 million for the bay-windowed Edwardian house on this popular road. It is a 265sq m (2,850sq ft) five-bedroom house with good period details and well-cared for gardens.
Cuanog, Deansgrange Road, Blackrock, Co Dublin is a detached 400sq m (4,500sq ft) property divided into three apartments. It sold in September for close to the asking price of €925,000 says agent Lisney. It has a separate mews and courtyard and one of its main attractions is the large, secluded back garden.
Savills recently sold this 222sq m (2,400sq ft) semi-detached family home at 38 Trees Road, Mount Merrion, Co Dublin, for under the asking price of €995,000 say the agents. Extended and refurbished, it has a large conservatory/sunroom, a 130ft long back garden, and is close to the N11 in Stillorgan.
A 78sq m (840sq ft) two-bed apartment on the seventh floor of Hanover Riverside at Grand Canal Square, Dublin 2, was sold recently for just below the asking price of €330,000 says agent Owen Reilly. The apartment has a balcony with river views, parking, and an annual service charge of €1,850.

New laws to slash rents for inviable businesses - Independent.ie

2011-10-10T14:45:00.001+01:00

By JEROME REILLY, EXCLUSIVE

Sunday October 09 2011

Radical new laws being finalised by the Government will mean small businesses will be able to get their rent slashed if they can prove that they won't be able to survive the recession without a cut, the Sunday Independent has learned.
The long-awaited legislation will tackle the scourge of upward-only rents -- considered the greatest threat to the viability of the retail sector which employs 255,000 people all over the country.
The Landlord and Tenant (Business Leases Rent Review) Bill will change forever the relationship between tenant and landlord and impact on tens of thousands of businesses around the country -- not just shops.
The "game-changer" legislation will effectively give small businesses, crippled by sky-high rents set at the height of the boom, a chance to survive the downturn and rebuild.
It will apply to tenants who are currently paying rents higher than the current market rate.
If tenants can prove that the rent poses a threat to the present or future viability of the business, the rent will be cut to the current market rate.
The new "market rate" rent will apply for five years from the start of the rent cut.
If there is a further deterioration in the economy and the market continues to fall, the tenant will be able to ask for a review to determine the new market rate once during the five-year period.
There will also be safeguards built in for landlords, considered essential if the Irish property market is to remain a viable market for national and international property investors including institutions like pension funds.
The Sunday Independent has learned that if the landlord believes that the new "market rate" rent will significantly hit their ability to service loans, they will be able, with three months notice, to then terminate the lease within six months and try and find another tenant willing to pay more.
But if the lease is terminated by the landlord, the tenant will be able to claim compensation for any improvements they made to the premises while they were renting it.
A mediation scheme is also on the way to help settle disputes.
Initially, if a tenant wants to make a case to have their rent cut to the current market rate, they must supply the landlord, on request, with details of company ownership, employee numbers, financial information, most recent accounts and information supporting the claim that their business is vulnerable without a rent cut.
If no agreement is reached, the case will go to mediation with a hearing taking place within 28 days.
If that process fails, the tenant will have 12 months from the original request to apply to the circuit court for a decision. The courts will be able to fix the rent to be paid or could dismiss the proceedings if they believe the tenant does not qualify under the viability clause.
Changes to the upward-only rent reviews is a controversial issue. Even the Central Bank sent out a mixed message during its bulletin last week saying that new legislation to allow tenants to seek cuts in rents "may intensify" the weakness in the property market.
However, they also included an important caveat suggesting that "increased flexibility in commercial rent contracts would further enhance the competitiveness of the Irish economy".
Some complex issues also have to be finalised, including the issue regarding foreign businesses in Ireland who employ 45,000 people in the retail sector alone.
They want their Irish operations "ringfenced" so that they will be be able to apply for current market rents based solely on the viability of their businesses here and not based on the company's international performance.
The recent decision by the Dixon Retail Group, which includes PC World and Currys, to withdraw from the Spanish market shows that large international retailers will pull the plug if they see no prospect of a return to profitability in the medium term.
Typical among the international companies operating here is Australia-based multinational Harvey Norman which currently employs 750 people in Ireland and which expanded very rapidly here during the boom. As a result, Harvey Norman signed rent agreements here which would appear to be unsustainable in the current market where spending on household, electronics and white goods has fallen off a cliff.
The company's Irish chief, Blaine Callard, told the Sunday Independent: "Indigenous and foreign retailers operating in Ireland all have the same concerns; that there is now a two-tier rental system at the moment because new entrants to the marketplace can already avail of market rate rents which gives them an advantage over those who signed long-term leases during the boom.
"We are having all the same difficulties as local retailers. We are operating in a depressed market in all the same categories. What we are concerned about is that the new legislation doesn't discriminate again foreign investors and international retailers in terms of what is a qualifying tenant.
"The legislation has to be very careful to send the message to foreign investors that if your retail operation in Ireland is losing a significant amount of money, then you are not going to be treated any differently to an indigenous retailer.
"We need to see light at the end of the tunnel. If the legislation sends out the wrong message, we are not going to be able to avail of this law. I think Ireland Inc needs to send out the right message. This is actually going to be a jobs bill."
Dave Fitzsimons of Retail Excellence Ireland, which has led the campaign against upward-only rents, told the Sunday Independent: "According to our sources, a number of significant international retailers are actively considering withdrawal from the Irish market. Their decision will be made based on the content and expedience of the Government-proposed legislation to allow tenants to re-negotiate rent.
"If the legislation does not allow renegotiation of untenable rents, we will witness the most significant market withdrawal ever. Such a withdrawal will deliver job losses."

Cut in commercial rate of stamp duty suggested - The Irish Times

2011-10-10T14:40:00.001+01:00

RONAN McGREEVY
PROPERTY: A PROPOSAL to consider a drastic cut in the commercial rate of stamp duty arising out of the Global Irish Economic Forum has been welcomed by the Society of Chartered Surveyors.
The Minister for Finance, Michael Noonan, said delegates to the forum had impressed upon him that Ireland’s rate of commercial stamp duty was not competitive.
He said Ireland’s rate of 6 per cent compares to 1 per cent in London. That meant that an American investor, for instance, investing in the Dublin market would have to devote a considerable proportion of his profit to paying stamp duty first.
Society vice-president Roland O’Connell said it would welcome plans to “investigate cuts to stamp duty on commercial properties which could stimulate foreign direct investment and create jobs”.
However, he said that the priority for Government should be ending the uncertainty around the possible retrospective banning of upward-only rent reviews, which he claimed was having a “detrimental effect” on the market.
Speaking before addressing a closed session of the forum, Mr Noonan pointed out the commercial property market in Ireland was controlled by Nama. He cautioned that it was only something that had arisen during discussions at the forum and it was not a given that it would be introduced.
“If we were thinking of changing that, now it is a good time because our take on stamp duty is so low anyway. It is always at the bottom of the market that you can change things,” he said.
Mr Noonan hoped that three or four big ideas could come out of the forum that would feed into a jobs initiative being launched next April by Minister for Enterprise Richard Bruton.

Common sense has no place in NAMAland | Irish Examiner

2011-10-04T16:27:00.001+01:00

NAMA has become a behemoth veiled in a cloud of legal and political jargon. David O’Mahony reveals how lives are being put on hold by the agency’s red tape
MY wife and I have been trying to buy a house since March. That’s when we signed the contracts, having been fortunate enough to be cleared for a mortgage.
The house, part of the last phase of a large estate in Glanmire, Co Cork, was due to be completed on June 30. But then NAMA came into play and we were left in limbo.
By the start of June, we were concerned at the lack of progress on the house. I would estimate that it needs a maximum of three weeks’ work, as the plastering and electrical work has been done (apart from a few small bits).
When I contacted the developer, Murphy Construction, in the middle of June, I was told it would be about six weeks late. Despite the fate of most developers in the country, we did not know for certain that the company was in NAMAland, and it had not even been suggested to us that there might be a delay. In fact, my wife had met the site foreman the previous week and he said they would be hanging the doors within a week.
The whole idea behind pushing for a June 30 completion date — which the developer agreed to readily and which was written into our contract — was so we would have the house before we got married on August 6. Even if it was not ready to move into, we would have been able to get it tiled and floored, as well as have the kitchen fitted.
We have paid €11,000 in deposits and more for a kitchen, tiles and furniture, not to mention several hundred for electrical work. The kitchen, which has been paid for, is ready to build. The tiles, which have been paid for, are at my wife’s neighbour’s house.
We only went ahead with all this because we were assured of the completion date.
As things stand, the developer needs working capital to finish a number of houses in the estate. It has needed this working capital for several months, and we have been waiting just as long.
After weeks and weeks of to-ing and fro-ing, NAMA told the developer that it would contact them with a decision last Friday. It did not, and still has not.
There are at least eight other buyers in the same situation in this estate. If everyone was paying broadly the same price as us for their house, it means NAMA is holding up about €2 million worth of property deals.
Murphy’s has told me it has over 50 properties it is trying to sell, but can’t because of NAMA. I couldn’t even begin to put a value on those — but if this is how one developer is faring, you can imagine how many sales are in limbo. Surely, it would make sense to sell properties sooner rather than later, thereby generating revenue for NAMA and some working capital for the builder.
But I fear common sense has no place in NAMAland.
While I wish the developer had been more forthright about the obstacles, at this point the company is as stuck as we are. NAMA is a law unto itself.
We have been in limbo for months, with no indication that salvation is near. We cannot be the only ones at their wits’ end.
All we want is our house, so we can build a home like any other married couple. It should not be this difficult — but NAMA has made it so.

via irishexaminer.com

How low can house prices go? - The Irish Times

2011-10-04T15:24:00.001+01:00

Ireland’s property boom was the biggest, and our crash the most violent. In a week that brought news of a further drop in house prices, Economics Editor DAN O’BRIEN explains why the market won’t recover any time soon
‘THE FUNDAMENTALS of the property market are sound, going forward.” This mantra was repeated constantly during the boom by those who believed that no risks were attached to soaring property prices.
If any reminder was needed of how badly wrong this view was, it came this week with new official figures showing yet another fall in residential property prices in August. This, according to statisticians, brought the total decline since the property-price peak, in late 2007, to more than 43 per cent, one of the biggest drops in the world.
The latest figures from the auctioneer Sherry FitzGerald, also published this week, are worse still, suggesting that average prices are down by a huge 58 per cent since the bubble burst.
The belief that property was a one-way bet became ingrained during the Tiger era. Perhaps this was understandable: the longer any phenomenon continues, the more normal it looks. Such is the psychology that generates price bubbles. And Ireland led the world in the size and duration of its bubble.
According to the Economist’s property-price index, no other European or North American country experienced price rises of the same magnitude over such a long period. In the decade from the index’s start date, in early 1997, Irish property prices quadrupled. The only two peer countries to see a rise of remotely similar proportions were Britain and Spain, where prices trebled. The US saw a much more modest rise over the same period, of about 130 per cent, which was not unusual internationally.
Ireland experienced the largest property bubble and the most violent property crash. That crash, alas, is not over yet, and prices are unlikely to stabilise until next year at the earliest. If the 2011 rate of decline in residential property prices continues for another 12 months, prices will fall by about 15 per cent from their current level. Given the headwinds facing the market, that is more likely than not.
But the highly paid consultants who arrived in Ireland to stress-test the banks after last December’s EU-IMF bailout are working on an even gloomier set of assumptions. Their baseline view is that prices will fall by a further 20 per cent before the market hits bottom. In their worst-case scenario, the decline would be almost 30 per cent. That would bring the fall from the 2007 peak to 59 per cent.
Although there are benefits to lower prices in the longer term, the weak property market feeds through to the wider economy in many ways. One of these is the wealth effect. When prices are rising, people feel better off as the value of their home – usually their biggest asset – grows in value. On average, they save less and spend more.
When prices are on the way down, all this goes into reverse to create a negative wealth effect. Now people are salting away far higher proportions of their already shrunken incomes. The result is to reduce further the level of activity in the domestic economy.
So how far will prices fall and for how much longer will the economy be afflicted by the resulting negative wealth effect?
It is not necessarily the size of a bubble that determines how low prices will go when they fall. More important in the Tiger bubble was the extent to which it was inflated by unsustainable drivers, such as risk-blind bankers hosing money at anyone taking a punt on property.
Looking at other countries helps in assessing where Irish prices are likely to end up. Consider our nearest neighbour, where prices have fallen by a relatively small 11 per cent since 2007, a fact that has provided one of the few positives for Nama, which offloaded some of its London trophy properties this week at no cost to beleaguered Irish taxpayers. Among the most important reasons for Britain’s house-price stability are its tight planning laws, which mean that few new houses are built across the water.
It was different here during the property frenzy, when building permits were extraordinarily easy to obtain. The result was that, in 2007, 90,000 homes were built here while 180,000 were built in Britain, wildly disproportionate figures given that the population of our neighbouring island is more than 13 times greater than that of the Republic.
If there is an undersupply of houses in Britain, the building mania here between 1997 and 2007 has led to a huge oversupply. While the extent of that oversupply is contested, nobody doubts the existence of a large stock of unsold homes. According to the property website daft.ie, the number of unsold properties on its books up to the second quarter of this year had remained stubbornly high, with hardly any reduction over the past three years. This glut will weigh on the market for some time to come, putting continued downward pressure on prices.
IF BUILDING TOO MANY houses can end in tears, so can bad lending by banks. Although the US did not look out of the ordinary in the property-price rises it experienced from 1997 to 2006 (130 per cent compared with Ireland’s 400 per cent), it has suffered the second-worst rich-world crash (after Ireland), and the residential property-price drops from coast to coast are now greater than those during the Great Depression in the 1930s.
One of the main reasons for the US economy’s woes was the quality of bank lending. American financiers gave the world subprime mortgages. The idea behind these was simple and seemingly good: lend to people who, traditionally, would not be entertained by a bank manager, but charge a higher rate of interest to cover higher default rates.
If the theory had its attractions, the practice was a disaster. The proportion of subprime-mortgage holders who defaulted was many multiples higher than what had been projected. The repercussions of these defaults triggered the worst global financial and economic crisis since the 1930s.
While subprime-mortgage lending made a mercifully late appearance in Ireland, sparing us an even more painful crash, Irish bankers dished out mortgages on the rosy assumption that nothing could go wrong with the property market. At worst, they believed that prices would plateau, unemployment would remain low and economic growth would continue, if at a more modest pace.
But if banks lent too much during the boom, they are not lending enough now. The latest figures, released yesterday, show that bank lending for property purchases continued its long decline in August. The lack of new mortgage financing is yet another factor weighing on the market, as is the rising cost of financing mortgages for those who have been able to secure them.
At a time when almost all of the drivers of demand are weak, the psychology of buyers in a market where prices are falling has a further negative effect. When prices rose, seemingly inexorably, it was all about getting a foot on the property ladder, at almost any cost. But now that prices are falling, also seemingly inexorably, most rational people want nothing to do with the property ladder.
This is part and parcel of any deflationary dynamic: potential buyers postpone their purchases in anticipation of even lower prices, sucking even more demand out of the market and adding momentum to the downward spiral.
Can any good come from all of this? Certainly, even if the potential benefits may not be glaringly obvious at this juncture.
Too-high property prices impact on everything from the quality of people’s lives to national competitiveness. Although the collapse in prices has left many people in dire straits and brought down the banks, more affordable housing and cheaper commercial property serve the wider interest.
Even if those looking to buy homes have not benefited much from lower prices (because of the mortgage famine), the huge falls in prices of commercial property, such as offices and factories, have already made Ireland much more attractive to companies looking to set up shop or expand existing operations.
Economists do not agree on much, but there is a consensus that new businesses, be they foreign or home-grown, will create the jobs and wealth to generate sustainable recovery, however long that takes.
Why our banking crisis was so costly
As the chart above shows, Irish residential property prices have fallen by more than in peer countries, but this does not explain why the Irish banking crash has been many times more costly than elsewhere. Last week, for example, the IMF estimated that the direct budgetary costs of Ireland’s crisis had reached almost 40 per cent of all income generated in the economy in a single year. In the US, which has suffered the second-largest house-price crash, the net cost to taxpayers was just 3 per cent.
The reason for the size of Irish banking losses lies in horrifyingly bad lending to property developers. If there was a bubble in the residential market, there was a superbubble in commercial property. Prices of offices, shops and factories rose higher and have fallen far more sharply than those of homes, and some development land is worth just 5 per cent of the amount paid for it.
Property developers have gone bust en masse, bringing down the banks that fought to lend to them. In this respect, Ireland is depressingly unique.

80% of mortgage applications are refused | Irish Examiner

2011-10-04T14:25:00.001+01:00

FOUR out of five mortgage applications are being refused by financial institutions, according to a survey of brokers.
In a week when economists warned house prices will recover only when banks start lending, when it comes to getting a home loan, two-thirds of brokers believe the situation is worse than this time last year.
It is also taking longer to close loans, with two-thirds of brokers saying it now takes four months or longer, up almost 6% on the first quarter of the year.
A survey from the Professional Insurance Brokers Association (PIBA) found half of brokers claim up to 80% of mortgage applications were declined by lenders in the second quarter of this year, compared with 42% in the previous quarter.
PIBA director Rachel Doyle said the results are "disappointing but not surprising".
"The banks are largely unwilling to lend for mortgages," she said. "The lending situation has gone from one end of the spectrum to the other, from excessive lending to a dearth of lending. No one is suggesting that lenders should go back to the era of irrational lending. What is happening now is the direct opposite. People who have a strong capability to repay are being refused loans under various guises. The banks are putting impediments in the way of applicants. We are still a long way off having a normal functioning banking system."
Reasons for refusal include a lack of job security, no saving history or a bad credit rating.
Bloxham stockbrokers said house prices could rise by as early as 2013 by around by 3% or 4%. It said, however, that any rise over the next few years is likely to be in low single digits.
Ronan O’Driscoll of Savills real estate said he agrees some house price growth is likely over the next five years, with modest single digit growth likely.
"The level of growth will be sectoral, and we expect houses in mature city locations to show positive growth ahead of rural houses and all apartments," he said.
Meanwhile, NAMA chief executive Brendan McDonagh said the outlook is cloudier for Ireland’s residential property market than its commercial market due to its dependence on the real economy and the overall outlook for employment, net pay and interest rates.
House prices have fallen for 43 months to just over half their 2007 peak.

Nama plan too big a gamble for taxpayers - Independent.ie

2011-10-04T13:22:00.001+01:00

FEARS are rife that Ireland's 'bad bank' -- the National Asset Management Agen-cy -- is about to gamble away millions of euro of taxpayers' money with its latest plan to kickstart property sales.
Under the plan, which is due to kick off later this year, Nama is prepared to swallow losses on behalf of a house buyer who buys one of its properties -- if that property falls in value by a fifth over the next five years. The plan has already sparked the concern of the Minister of State for Housing Willie Penrose, who believes it could inflate property prices -- and of the OECD economist Christopher Andre, who last week said that such a move could be counter-productive.
Not only could Nama's plan be counter-productive, however, there is a danger that it will simply be another way for the State -- which has already thrown billions of euro of taxpayers' money into the banks -- to pour more of our money down the drain. Even worse, it could ultimately be the banks -- rather than taxpayers -- who benefit.
"With this plan, Nama is gambling on the direction of Irish house prices using taxpayers' money," said Karl Deeter, operations manager with Irish Mortgage Brokers. "Nama will give the banks a better brand of insurance than they can currently get because the loss (if negative equity arises after the house purchase) won't be carried by the banks -- it will be carried by Nama."
Dr Brendan Williams, a lecturer in UCD who co-wrote a major report on Irish ghost estates last year, also expressed concern about the plan. "This is taxpayers' money that is being used as some sort of guarantee," said Williams. "Whose interest is such an intervention in? If it's in the interest of the holders of existing properties in Ireland, I couldn't support it. Unless the plan is in the broader public good of achieving more affordable property prices, I'd find it hard to support it -- particularly if it stops the property market reaching a natural bottom."
Nama insists the plan is not a gamble or waste of taxpayers' money. "Nama will ultimately sell these properties at some point in the future," said a spokesman for Nama. "If Nama sells one of its houses in three or four years' time instead of today, it could get a lower price for the house then than it will now. We are saying -- let's take the reduced price now, conclude the house sale, get someone living in the house, take the property off our hands and get property transactions going. The scheme is designed for a relatively small number of people who can afford a house -- but who are reluctant to buy because prices may continue to fall. It's a modest intervention in the market but it could be important in terms of generating sales."
Gregory Connor, professor of finance with NUI Maynooth, doesn't buy Nama's argument, however. "The motivation given by Nama for implementing the scheme is not entirely convincing," said Connor. "The scheme has considerable potential to manipulate recorded property sales prices, to damage confidence in Irish property market openness, and to build up a hidden future cash-flow liability for Irish taxpayers."
Previous interventions in the property market, including the tax incentives introduced to regenerate run-down inner-city areas and encourage developers to build in small towns and rural areas, have run for too long, cost taxpayers much more than envisaged and ultimately damaged the property market. "Our recent history shows that the overuse of incentives totally distorted the property market," said Williams. "When we look at some of the counties where demand for properties is lowest today, there were heavy tax incentives to purchase and invest in properties there in the past -- irrespective of demand. A key selling point of a lot of the developments in those counties was the availability of tax incentives."
Tax incentives have led to a considerable oversupply of properties in certain areas, particularly in western counties -- and are responsible for much of the 120,000 idle homes on ghost estates dotted around the country today. The oversupply of properties in counties such as Roscommon, Mayo and Sligo for example is more than 20 per cent.
"We've been over-reliant on incentives and we should try to find out what the real property market is," said Williams. "We are still absorbing the impact of old incentives. The impact of subsidies closed off in 2008 will run until 2020."
Marie Hunt, director with property consultants CB Richard Ellis, also believes the market works best "if left to run its natural course".
As Nama now owns about 10,000 properties, it is one of the biggest property owners in the country. About 8,000 of these properties are apartments or duplexes. Nama will, however, concentrate on selling its houses first "because that's what people are interested in buying", said its spokesman.
The sheer amount of properties under Nama's control means it must do something to get the property market going, according to Ronan Reid, chairman of Dolmen Securities.
"Nama's role is to get a return on its investments," said Reid. "Its move to get involved in the market and effectively replace the banks makes sense."
Reid doesn't believe Nama's plan will inflate prices or encourage people to overspend. "No one will overspend in the current environment," said Reid. "Nama's plan could get the property market going again and give people the confidence they need to buy. Anything that moves towards giving some comfort to people that we're reaching a bottom in property prices is a good thing."
Reid also believes Nama's plan could reap benefits for the beleaguered construction sector. "A strong construction sector is good for any economy," said Reid.
Even if the Nama scheme has merits, its chances of having any impact on a property market that is plagued by a stagnant economy, record unemployment and high emigration are slim. House prices have fallen by about 43 per cent on average since 2007, with the falls for Dublin houses at 51 per cent -- and at 57 per cent for Dublin apartments, according to official figures released last week.
Some in the industry believe the falls are even steeper than this.
"I believe that, on average, house prices in Ireland have actually fallen by 55 per cent from their peak -- with apartments experiencing falls of up to 60 per cent," said Hunt. "Nama is making a genuine effort to encourage some sales activity in the residential sector but incentive schemes like this are unlikely to kickstart a great deal of activity in their own right. There is limited funding available for would-be buyers and even if they could secure finance, they don't have the confidence to buy when they fear for their job security. House prices will stagnate until such time as mortgages become more readily available and the rate of unemployment shows strong signs of decreasing."
David Duffy, research officer with the Economic and Social Research Institute, agrees.
"House prices will probably go down more over the next few years," said Duffy. "There are a lot of reasons for that, including emigration, falling incomes, and high unemployment. There's also a lot of uncertainty about international debt -- and how that debt would affect our economy if it goes badly wrong. Until that uncertainty is removed, people will be reluctant to make a major commitment like buying a home. In such an environment, I'm not sure whether an intervention such as Nama's would have a significant impact. Overall, you have to wonder about intervening in the market given the negative consequences of past incentives."
Bloxham Stockbrokers believes it will be 2013 before Irish house prices start to pick up again -- with Dublin leading the recovery "given that the capital has the biggest concentration of people".
Deeter, however, believes the recovery is a bit further down the road -- and that house prices will continue to fall for another four years. "It doesn't matter what anyone does," said Deeter. "We are stuck in this cycle of downward prices."
It looks like those who bought properties during the boom years will have a lot more losses to nurse over the next few years -- and may never recover financially.
Falling house prices could, however, be good for our economy and competitiveness.
"Overall for the economy, the decline of property prices is healthy and should continue," said Connor. "The decline in prices should be speeded up. What we need is price clarity in the property market."
Whether or not Nama's new plan will delay price clarity -- and prevent the market from running its natural course remains to be seen. History tells us that meddling with the market causes more harm than good.
It could be time for Nama to backpedal before it's too late.