Monday, February 28, 2011

No plan for 'fire sale' of assets, says Nama -

The National Asset Management Agency (Nama) will help stabilise Northern Ireland's property market by taking up to a decade to dispose of assets, the agency said.

A longer-term view of the loans managed by the organisation would provide part of the solution to the region's problems, Nama head of credit and risk Ronnie Hanna said. Prices are plummeting and there are few sales as first-time buyers await further falls in the cost and struggle to get mortgages.

There had been warnings by Northern Ireland Finance Minister Sammy Wilson against a "fire sale" of assets by Nama in an attempt to quickly realise cash.

Mr Hanna said: "Nama is an asset management vehicle and contrary to how it is portrayed in some quarters it is not a toxic bank.

"We have the capacity to take a longer term view of the loans we take on, if it makes commercial sense, and our timeframe is to manage and realise the loans and the property held as collateral for the loans over a seven to 10-year time period."

He said Nama, created by the Irish Republic's government to manage loans from five Irish banks linked to land and development, had no interest in hoarding assets longer than necessary.

"We will work with debtors if it makes commercial sense, but debtors must submit a business plan which includes a realistic repayment schedule and we require full co-operation and full disclosure from debtors. Debtor co-operation and capability is key," he said.

The nominal value of Northern Ireland loans that Nama has acquired from some 180 debtors is £3.35bn and this represents 5% of Nama's total loan portfolio.

Undeveloped land accounts for 60% of assets, 29% commercial investments, 10% land under development and 1% residential development.

Just under a third of the value is in Belfast, 21% in Co Down and 2% in Derry city.

In a directors' report last year, PBN Properties, owners of Carryduff Shopping Centres, said loans with Bank of Ireland had been moved to the agency while some from Allied Irish Banks and Anglo Irish would be transferred soon.

Hilden Developments, which is owned by an English company, last year said around £45m which it had borrowed from Irish Nationwide Building Society had been transferred to the asset management agency.

They are frightened by NAMA in Northern Ireland as well!

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Monday, February 21, 2011

Carphone withholding rent in dispute with docklands body - The Irish Times - Fri, Feb 18, 2011

THE CHIEF executive of Carphone Warehouse says it has not paid rent on its outlet in the CHQ centre in the Dublin docklands since April 2010 in protest at the behaviour of the docklands authority.

Stephen Mackarel said his company had been trying to discuss the future of the troubled centre with the executive of the Dublin Docklands Development Authority (DDDA) for more than a year, but has not received any response.

“Last March the then Minister for Justice, Equality and Law Reform Dermot Ahern said landlords across the country were having open dialogue with tenants to reduce rents. This has not been our experience with the State-run DDDA, which won’t even return phone calls.”

Mr Mackarel said the mobile phone retailer had not paid rent on its CHQ premises since April 2010 and had diverted the funds into a separate escrow account in an effort to force the authority to communicate with it directly.

However the strategy had backfired as the authority had initiated legal action for the non-payment of rent without first making any attempt to discuss its tenant’s difficulties, he added.

Mr Mackarel learned two weeks ago the authority was taking legal action when he read about it in The Irish Times. “Now a load of money will go to a firm of solicitors,” he said.

The company opened an outlet in CHQ in November 2007 and estimates it has lost approximately €500,000 as a result. It pays rent of €56,000 a year and has a long lease that includes an exit fee. “The market rent for the CHQ is zero,” he said.

The centre has an occupancy of approximately 40 per cent and has been described by Retail Excellence Ireland as the worst-performing shopping centre in Ireland.

Mr Mackarel said he was told in February of last year that the authority was preparing a plan of action for the centre but had heard nothing since. It was his experience that the authority got third parties such as solicitors to respond to queries, rather than sit down with tenants.

“We have decided to go public on the issue in a final attempt to push them towards open negotiation with their remaining tenants . . . We think their strategy of initiating legal proceedings against tenants is a total waste of money and should only be the final step in the process, not the solution.”

Carphone Warehouse has 78 outlets. A spokeswoman for the authority said it intended to pursue all outstanding debts. She did not want to comment further.

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High Court rejects rescue plan for McInerney - The Irish Times - Fri, Feb 18, 2011


THE HIGH Court yesterday rejected a rescue plan for housebuilder McInerney because the proposals were unfairly prejudicial to the interests of Belgian-owned bank KBC, one of three lenders to which the group owes €113 million.

The rescue plan for McInerney’s Irish business, which has been in examinership and under the High Court’s protection from its creditors since September, involved an offer of €25 million in full settlement of the bank debt from US fund Oaktree Capital, which had been planning to invest in the company.

Early last month, the High Court ruled against the proposal on the basis it was unfairly prejudicial to the interests of the three banks involved: KBC, State-owned Anglo Irish and Bank of Ireland.

Mr Justice Frank Clarke agreed to revisit the ruling after it emerged €80 million or so of the total which was due to the two Irish lenders was destined to be transferred to the National Asset Management Agency (Nama).

After hearing further submissions from the banks, the company and the examiner, Bill O’Riordan of PricewaterhouseCoopers, the judge ruled yesterday he could not confirm the rescue plan as it was unfairly prejudicial to KBC.

“A scheme is unfairly prejudicial where it is unfairly prejudicial to one creditor,” his ruling states. “KBC is such a creditor.”

As a result of the ruling, McInerney now faces the possibility of being placed in receivership, with the potential loss of 109 jobs.

The judge is due to make final orders relating to the case on Monday. It is understood the company is considering appealing to the Supreme Court.

Examinership legislation requires the courts to refuse to confirm a rescue plan put forward by the examiner if it is unfairly prejudicial to any creditor. Effectively this means that the creditor would fare better in either a receivership or a liquidation.

All three banks, which acted as a syndicate when they loaned the money to McInerney, opposed the examinership and the rescue plan, even though a majority of creditors backed the scheme.

Instead they proposed an 11-year receivership and argued that they could recover an estimated €50 million over the course of this by building on the McInerney sites, against which the debt is secured, and selling the homes.

When he ruled last month, Mr Justice Clarke said the banks had put forward a credible case to support this claim and, as a result, the rescue plan was prejudicial to all their interests.

Yesterday, he said it appeared likely that Nama would take over the Anglo Irish and Bank of Ireland loans. While he agreed that it was possible the State agency would pay more for their share of the loans than the amount on offer under the rescue plan, the chances of that happening were “so speculative as to provide little basis for a real assessment of prejudice”.

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Up to 80 properties set for 'fast auction' - The Irish Times - Sat, Feb 19, 2011

MARK HENNESSY, London Editor

A BRITISH auctioneer long practised in selling properties held by banks, receivers and homeowners needing to sell quickly will hold the first of a series of sales in Dublin in April, where up to 80 properties are to go under the hammer.

The Shelbourne Hotel auction in mid-April is being organised by Dublin estate agent Stephen McCarthy of Space4U, in alliance with Allsop, one of the largest auction houses in Britain.

Realistic reserves “lower than 50 per cent from peak” will be set, said Mr McCarthy.

He said his clients wanted fast sales. “They want certainty, they want to be paid in 30 days and for that they are prepared to offer a price to interest.”

Gary Murphy of Allsop said: “In Ireland we will state that the reserve will not exceed a particular figure. It might be lower, so it is a very clear message: if you get to that figure and nobody outbids you it will be sold to you.”

Just three of the properties have been listed by homeowners themselves. The rest are already being handled by receivers: “The majority of our properties are in receivership. Receiverships have been taking place for two or three years now in Ireland.

“I felt that something needed to happen to create a market where people felt comfortable that they were having an opportunity to buy assets from receivers and banks in an open environment, which I don’t believe has been offered before in Ireland,” said Mr McCarthy.

A full catalogue will be available from early March.

There are properties confirmed for the sale from Dublin, Cork, Galway and Limerick.

Half of the total have tenants in place, but the rest are ready for occupation.

Potential buyers will be able to download all of the documentation from the companies’ websites, inspect properties and carry out any necessary engineers’ reports before the auction, said Mr McCarthy.

Questioned about the views of other auctioneers, Mr McCarthy said: “Nobody is knocking on the door saying that this is great news for the auctioneering business. It has never been done before so people are fearful about it.”

However, he argued that the auction would benefit the property trade by establishing a floor from which people can build.

“There are a lot of people sitting on the sidelines waiting for the bottom.

“Deep down, they want to see what the real number is. People really want to know where that floor is. If I was the other auctioneer I would think that this would help me persuade my client to be more realistic, to find out where the market really is,” he said.

The numbers of properties being put on the market by receivers and “distressed sellers” is increasing in Ireland and Britain, said Mr Murphy. “It is so transparent. They like to be seen to get the best possible price; they have a duty to do so.”

However, a successful auction will not spur banks into repossessing more homes from struggling mortgage-holders, argued Mr Murphy, who said repossessions are “politically sensitive” on both sides of the Irish Sea.

Mr McCarthy said: “There have been very few in Ireland. It seems to be that the banks are very keen not to take property, but people are letting properties go and emigrating. People are walking away leaving the jangling keys.

“There is no getting away from the fact that if the property is distressed then a receiver is involved. We didn’t set this up to get everybody’s house repossessed. We are dealing with properties that are in the banks’ or the receivers’ [hands].”

Planning for the auction began a year ago, though Mr McCarthy has revised his original view that the majority would be bought by owner-occupiers. The lack of finance means, he believes, that sales will be predominately to investors.

“Banks are struggling to lend because they don’t know what value to lend on. Valuation in Ireland is a difficult thing to get a hold on.

“This will give comfort to people. They will know that there is a market in certain areas at a certain price.

“I actually think it is a solution, more than a problem.”

If properly implemented, this will show the "true" current value of proeprty in Ireland. A lot of people may get a shock!
Fasten your seatbelts.

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Commercial rent is a zero-sum game -

IN a recession as deep as this one governments have to make hard choices, inevitably disappointing some constituencies and pleasing others.

So it is with Ireland's collapsed property market. On the one hand are embattled retailers seeking relief on boomtime rents, on the other hand are landlords and investors seeking to protect their rental yields as the value of their fixed assets plummet.

Unfortunately, when it comes to commercial rents it is a zero-sum game.

Whatever concessions a retailer makes, is a gain for the landlord and whatever concessions a landlord makes is a gain for the retailer.

The decision by a consortium not to buy Liffey Valley shopping centre, reportedly because of concerns over the rules on leases in Ireland, shows how divisive this issue has become.

During the boom years the issue of leases rarely surfaced in the public domain and retailers were making healthy, some argue extortionate, profits.

But since 2008 two things have changed the relationship between landlord and retailer -- revenues in the retail sector have plunged; while on the landlord side the capital value of buildings has slumped, putting many of these investors under pressure with their banks.

The end result is that neither side can afford to be a price taker when leases are getting negotiated.

Up to now leases in general could only go upward when being re-negotiated, but the current government made a change in 2009 which meant that all leases from February 28, 2010 onwards could be lowered.

This sent shockwaves across the commercial property market and forced down the price of Irish real estate.

But Fine Gael and Labour have gone further, talking about removing the upward-only rent review rules even from leases before February 2010.

This idea appears to have made the Irish commercial property market very unappetising to outside investors, such as those who were going to buy Liffey Valley, one of the State's largest retail developments.

Of course many of the investors depending on rental income in Ireland don't operate in this jurisdiction, and essentially repatriate the profits elsewhere. But equally many retailers are in a similar category.

Like the original conflict between retailers and landlords, this turn of events means different things to different people.

For retailers it is welcome, meaning that future rents -- when reviewed -- could fall as much as 53pc according to recent court judgments.

For investors, pension funds, insurance companies and even NAMA, it is a wholly negative development meaning their income flow is going to be sharply reduced and great uncertainty over their future yield is now a reality.

Whether Fine Gael and Labour actually make the change to leasing rules they are promising remains to be seen, but certain key investors have decided they are not waiting around to find out.

- Emmet Oliver

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Rent review move sinks sale deal on Liffey Valley -

One of the biggest property deals in Ireland, for Liffey Valley in west Dublin, has collapsed amid concerns over Fine Gael/Labour plans to halt all upward-only rent reviews between landlords and retailers.

The sellers of the shopping centre -- the Duke of Westminster, who is one of the UK's richest landowners, and Aviva Investors -- were hoping to sell the property to F&C Reit and Area Property Partners, two international fund managers, for €350m.

But according to UK reports the uncertainty over the rental landscape in Ireland has scuppered the deal. New rules allowing all lease agreements to adjust downward would have made owning Liffey Valley a far less valuable opportunity.

While the Fianna Fail/Green Party Coalition amended the upward-only rent review rules to cover leases from February 2010 onwards, leases before that were not impacted by these changes. But the two opposition parties are looking at proposals to allow all lease agreements to be amended downward, subject to some exemptions.

Recent decisions from the Dublin Circuit Court has established a benchmark that means that in certain cases rents could drop by 53pc, providing huge relief to retailers but hurting yields on property for investors and pension funds.

Other sources, including the Irish Society of Chartered Surveyors, believe rents would fall by up to 20pc as opposed to the higher figure ordered by recent court cases where retailers went to law to get better deals.

'Property Week' reported yesterday that the deal to buy Liffey Valley has been close to completion on several occasions, but the changing political debate over upwards-only rent reviews has been creating uncertainty. A deal was signed off provisionally in January of last year, but bank finance was not available due to the uncertainty over what rental income can be driven from Liffey Valley.

It has been reported that Aviva and the Duke of Westminster, who controls the Grosvenor property portfolio, are not prepared to sell at prices below their own valuation.

Retailers have been pressing hard to allow rental rules to be more flexible across the market, with some even withholding rents in disputes over leases. Others have threatened to go out of business rather than concede to new rental increases.

But equally vociferously, those who invest in property have resisted the changes, saying that such a move will halt any new foreign investment coming into the market. The retrospective nature of the Fine Gael/Labour changes has particularly caused concern among professional property investors.

- Emmet Oliver Deputy Business Editor

This will be a hugely contentious issue for the commercial property market.

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How BoSi paid a heavy price for its Irish property gambles | The Post

How BoSi paid a heavy price for its Irish property gambles
20 February 2011 

With so much attention on the struggle to deal with the consequences of excessive lending in the Irish state-guaranteed banks, it is easy to forget just how badly a lender such as Bank of Scotland (Ireland) (BoSi) did in the Irish market.

As a newly-established company called Certus takes up the job of managing BoSi’s commercial loan portfolio, a fuller picture of the extent of property lending during the boom years is emerging.

BoSi received capital injections from its parent bank, Lloyds, totalling €8 billion during the meltdown of the last two years.

Having arrived in the Irish market with a bang, its really big year was 2000.

That year, the bank, led by then chief executive Mark Duffy, bought the state-owned ICC bank for €340 million.

A solidly run business lender, ICC had been part of the early industrial policy of the first Fianna Fáil administration in the 1930s.

Also in 2000 BoSi began aggressively going after the home loan market, by offering cut price mortgages.

The competition was wonderful for consumers, but may in the long run have contributed to the race to the bottom in terms of shovelling out

to first-time buyers.

Earlier this month the bank, which has now closed its retail and commercial banking operations here, acknowledged that it is prepared to do deals in certain circumstances with buy-to-let mortgage holders stuck in negative equity.

Having acquired a solid business lender, within five years BoSi had become immersed in the booming Irish property market. Profit peaked in 2007 at €272 million. By 2008, loans of nearly €20 billion were owed on around 6,700 loans.

The biggest borrowers were household names in property and other businesses, but property dominated.

A lot will have changed for many of the bank’s biggest borrowers since 2008.F or some they will have paid down some debt, and the amounts currently outstanding may be a lot less.

In other cases, where there have been receivers appointed, the situation for the bank will have got worse.

Multiple loans to property developers owed in late 2008 show the biggest single borrower was property developer Liam Carroll’s group of companies.

The bank’s gross exposure to Carroll was €750 million. Like other borrowers the net exposure to the bank was reduced by exemptions, such as cash deposits the borrower may have held with the bank.

Next was Bernard McNamara’s businesses, which carried a gross exposure for the bank of €610 million.

At that stage the bank was taking stakes in joint ventures with its biggest borrowers, on the pretext that it would create more profit upside for the bank when things went well.

However, it also meant a greater exposure and potential loss for the bank if it all went wrong.

In McNamara’s case, the company behind the Burlington Hotel, Soltura, had borrowed €285 million. McNamara himself had borrowed €168 million.

Towards the end of 2008 the bank took a specific bad debt provision on McNamara loans of €58 million.

But much worse was to come. Of its top 30 borrowers, the bank took bad debt provisions on two of its clients in the last quarter of 2008.

Impairment charges that year were over €500 million.

After McNamara was Derek Quinlan, to whom the bank’s gross exposure was €330 million in 2008.

Next came David Kennedy, of the Formation Group, who was heavily involved in property plays in Ireland and Britain. At the end of 2008, gross exposure here was €240million.The Rhatigan group was next with €220 million.

The Alken group, backed by Anthony Alken, is a major wine importer. Alken also became heavily involved in property development with BoSi. The bank took a 40 per cent stake in a property company associated with Anthony and Greg Alken.

Alken bought the former SDS site on the Naas road in west Dublin for €110 million. The bank had a gross exposure to the company set up to develop the site, Gateway MultiModal, of €128million at the end of 2008.

The bank’s gross exposure to Alken Group at the end of 2008 was just under €200 million.

Another big borrower was Jim Mansfield’s HSS group, which borrowed €180 million. Elliot Construction group was next with €175million.Hotelier and property developer Gerry Barrett’s Kitty Hall group was in there to the tune of €165million.

Sean Quinn’s Quinn Group had borrowed €150million, including a loan of €48 million owed by Bouverie No 2 Ltd, one of the company’s behind the Belfry hotel and golf course in Britain.

Other major borrowers in the bank’s top 20 included Brendan Hickey’s Brambleberry group (€130 million), Galway developers Walter King and Peter Gilhooley (€136 million), O’Flynn group (€120million), the county Monaghan based Tuskar Group (€95 million), Tom Moran’s T&S Taverns (€132 million), Terry Devey’s Grand Canal Square Developments (€100 million), and Pat Doherty’s Harcourt Developments group (€90 million).

Having acquired a lender to small and medium-sized businesses, by 2008 just three of the bank’s biggest borrowers had a core business outside property.

Taking exemptions and other factors into account, the largest net exposure of the bank was to McNamara. It amounted to 16 per cent of the bank’s own funds or capital.

This was within regulatory limits, but a hefty exposure none the less. Its top 10 borrowers accounted for 58 per cent of the bank’s own funds.

This concentration, particularly in property, led to massive losses when the economic crisis hit.

Within two months of this snapshot of the bank’s loan book, its chief executive Mark Duffy signalled in February 2009 that he was stepping down.

The bank reported a pre-tax loss of €2.9 billion in 2009. Impairments in the first half of 2010 were a further €1.5billion.

The management of the loan book now falls to Cetrus, a new company with a seven-year contract to manage BoSi’s outstanding loans.

Having just tied up an agreement last month with the main trade unions representing staff, that work can now begin in earnest

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Exotic alien plant species are moving in on ghost estates in Cahersiveen - The Irish Times - @DoneganGardens, this might interest you!


INVASIVE PLANT species are taking over unfinished housing estates in Kerry and threatening serious damage to building by growing through substrata such as concrete and tarmac, a report into biodiversity in urban areas in the county has warned.

The main town of the Iveragh peninsula, Cahersiveen, surrounded by areas of special conservation interest, is worst affected, according to the study by Atkins consultants, commissioned by Kerry County Council.

The invasion of exotic alien species was “widespread” in Cahersiveen, where 15m (49ft) long banks of the Japanese knotweed, which grows rampantly, had been spotted within the town, the study found.

Cahersiveen has a number of unfinished housing estates, the report noted. Himalayan knotweed, giant rhubarb and rhododendron were also problematic in Cahersiveen, the research into four urban areas including Tralee found.

Japanese knotweed, which is one of the world’s worst and most prolific invaders, spreading from tiny pieces to form leafy canopies 3m high, choking out other plant life, was also found on river banks in Tralee town centre.

The “highly invasive” species found in Kerry’s biggest town could damage flood defences as well as houses and buildings, and destabilise the river banks, according to the study.

“Of four towns studied, Cahersiveen supported the greatest cover, spread and variety of invasive exotic shrub species,” it said.

Japanese knotweed was “consistently found” in consolidated clumps and in scattered patches on roadsides, areas of unfinished housing developments and isolated spoil and rubble heaps throughout Cahersiveen, the report said.

The unfinished nature of the housing estates on the western side of the town provided opportunities for the establishment and spread of invasive species “through the various open and unstable parent materials on site”, it said.

The report recommended a further study be carried out, followed by a control and eradication programme.

The north Kerry coastal towns of Ballybunion and Tarbert were not as badly affected, it found.

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Inequity of commercial rates - A great letter in The Irish Times - Mon, Feb 21, 2011

Madam, – In the run-up to the election, politicians have mentioned commercial rates many times, because they are listening to the heartfelt pleas of struggling business owners. However, they do not appear to accept that it is the inequity of the system of levying rates that is the key problem.

The current method levies rates by valuation of premises rather than by turnover or profitability. This often means that businesses that require much smaller area from which to operate, pay much lower rates, yet some of these businesses enjoy much greater turnover and may not affected by seasonality. Neither does the current system take into account ability to pay. The result is that businesses are closing down.

The method of levying rates is not defined by local authority managers but by Government legislation The Valuation (Ireland) Act, 1852 is still the basis for valuation rating legislation. This system is derived from one that operated in England. In the 17th century it would have been impossible to rate personal property as well as real property and the practice was established of rating only real property and disregarding stock-in-trade. Surely in the 21st century where property is intellectual rather than measured in the square metre, the only fair and equitable method of levying commercial rates is by way of percentage of turnover, as is the case with VAT? – Yours, etc,



Kathleens Country House,

Tralee Road,

Killarney, Co Kerry.

While landlords have reduced rent levels in all but the most intransigient of cases, there has been no relaxation or amendment to the rating system or the level of rates demanded.
It is now possible that in some locations, the rates are more expensive than the rent, which is putting traders in an impossible situation.

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Is it too late to switch to a fixed mortgage? - The Irish Times by @conor_pope


MORTGAGE REPAYMENTS: Variable interest rates are on the rise and the only way to get some certainty is to switch to a fixed-rate mortgage – but with lenders starting to withdraw them from the market, is it time to jump in before it’s too late?

AS EVERY GAMBLER knows, the house always, always wins, except, perhaps when the gamble is on the house. In this country, the casinos – disguised as banks – took a massive punt on tracker mortgages during the boom. They lost and have continued to lose every day since the property bubble went pop.

To stem the resulting massive losses, the banks have spent the last 18 months pushing up their variable and fixed rates, effectively targeting standard variable rate (SVR) mortgage holders and punishing them for mistakes the banks themselves made.

Rate hikes have gathered pace in recent weeks with four of the main mortgage lenders announcing hikes in their SVRs, their fixed rates or both, and at least one announcing that it was getting rid of fixed rates altogether.

First out of the blocks was Permanent TSB, which announced a 1 per cent increase to its SVR earlier this month. It then temporarily suspended its fixed rates for new customers and introduced immediate increases of between 2 and 3 per cent on its fixed interest rates for existing mortgage holders rolling off fixed or discounted rates. Its two-year fixed-term rate went from 5.25 per cent to 7.25 per cent, while the five-year fixed rate leapt from 5.75 per cent to 8.75 per cent. Its 10-year rate went from 6.1 per cent to 9.1 per cent. With increases of this magnitude it was clear that the bank was pricing itself out of the market. Not as clear, though, as the action of the EBS, which left the fixed-rate market last week.

EBS also announced a 0.6 per cent increase in its SVR, from 3.83 per cent to 4.43 per cent, while Ulster Bank increased its SVR by half a point from 3.85 per cent to 4.35 per cent, from March 1st.

KBC Homeloans increased its two-year fixed-term mortgage from 3.7 per cent to 4 per cent. The bank’s three-year fixed rate climbed to 4.45 per cent from 3.9 per cent and its five-year fixed-rate mortgage was hiked by 0.7 per cent, from 4.5 per cent to 5.2 per cent.

So with the market in such a state of flux and all commentators predicting that the ECB is to start increasing its rates later this year, is it time to fix? It depends.

The National Consumer Agency (NCA) has cautioned against surrendering tracker mortgages, describing them as gold dust, and advised anyone with a variable rate to see if they can cope with interest rates going up by 2 per cent and compare that with fixed rates currently on offer. It is sound and simple advice. Fixing should be viewed as a budgeting tool which will give borrowers peace of mind so they can continue to meet repayments.

For every €100,000 owed, a 1 per cent increase adds around €61 to monthly repayments. Someone with a €250,000 mortgage, over 30 years, with an SVR of 3.5 per cent is paying €1,122 a month. If the interest rate goes up by 1 per cent to 4.5 per cent, the new monthly repayment will be €1,266. If it goes up 2 per cent to 5.5 per cent, the new monthly repayment will be €1,419.

According to Karl Deeter, of Irish Mortgage Brokers, trying to second-guess the market in the long term is “an impossible art” and the time to fix, for many, has already passed.

He points out that this time last year Permanent TSB was offering a 10-year fixed rate from 4.6 per cent, compared with 9.1 per cent today. “The horse has already bolted,” Deeter says. “The smart money always goes first and the stupid money goes at the end.”

He recalls clients with seven-figure mortgages who left low-cost trackers early last year to sign up for 10-year fixed-rate mortgages to give themselves a degree of security until 2020, but he would not advise people to do that now.

Another reality is that, generally speaking, the banks that have the best fixed rates are reluctant to take switchers, so people have a lot less choice than was the case in the past. “There isn’t one answer to suit everyone, but what I would advise people to do is decide what premium they are willing to pay to avoid rate hikes in the future. If they are not willing to pay any premium then they have to take their chances in the variable market,” Deeter says.

“It is not you versus the market, it is you versus you,” says financial adviser Frank Conway of He says that while the switching-to-save window has closed for many, there is still value out there, particularly with AIB, Bank of Ireland and KBC Homeloans. “We have carried out a number of surveys and people say that they can handle a 1.5 per cent hike but not much more than that, so if you can find a fixed rate that is within that margin you could consider fixing.”

Broker Kevin McNerney says that all borrowers on a SVR should explore the options open to them, but stresses that it depends on the bank they are currently with and whether or not it would be worth their while.

“Someone with AIB could be on a variable rate of 3.49 per cent and could get a three- year fixed rate for 3.89 per cent,” he says. On a mortgage of €250,000 over 25 years this would increase monthly repayments by €53. They could also look at a five-year fixed at 4.39 per cent, which would up repayments by €123 per month.

“This may seem like a big jump but the chances are they will be paying a lot higher in the coming years so it could end up being a small price to pay in the short term for the peace of mind that comes with it,” he says.

Someone with Permanent TSB may currently pay an SVR rate of 4.65 per cent, which is already pretty high. “However, if they wanted to look at fixing, the options are not as appealing,” McNerney says. It offers a two-year fixed rate of 7.25 per cent which, on a mortgage of €250,000 over 25 years, would see their repayments increase by €398 per month compared with the SVR. A five-year fixed rate of 8.75 per cent would see their repayments increase by €645 per month.

“This is a staggering increase of over 50 per cent in their monthly repayments,” McNerney says. “I believe that if someone can get a good three- or five-year fixed rate, which is 1 per cent to 1.5 per cent above what their current variable rate, then it should be worth considering, provided they can afford the increase.”

He also injects a sense of reality into the equation. “There are only a couple of lenders who will look at ‘switcher’ business where the loan-to-value is less than 80 per cent.”

Whether someone on a tracker should consider fixing was once unthinkable but it does depend on the rate. For example, Permanent TSB was offering trackers a few years back at just 0.95 per cent above ECB, so the current rate is 1.95 per cent. If you are on a tracker rate of around 3.5 per cent – ECB plus 2.5 per cent – and can get a fixed rate at around 4.5 per cent, then it might be worth looking at the figures.

“I would definitely not advise anyone to give up a tracker rate without first speaking to a financial adviser. They can help you look at the figures and it may be possible to work out a deal with your bank whereby they could ‘buy’ your tracker rate from you for an amount of money that would be paid off against your mortgage,” McNerney says.

This whole concept of banks buying trackers from customers is relatively new but will become a lot more mainstream in the years ahead. Effectively a bank would offer to reduce your mortgage by a percentage if you switched to a SVR from a tracker. While some banks are doing this on an informal basis at present, the amounts they are offering to tracker holders are laughable – as little as 1 per cent of the mortgage.

If they offered to reduce your mortgage by one-third – effectively taking a hit now rather than being bled dry for the next 25 years – it might start to make a whole lot of sense. It would go a long way to resolving the negative equity crisis too.

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Councils to slash spending on vital services as debts hit €4bn -

By Paul Melia and Treacy Hogan

Monday February 21 2011

ROADS will go unrepaired and local services suffer as councils face a €4bn funding black hole.

Local authorities have plunged even further into the red as their income dries up and they borrow money to make ends meet, an Irish Independent investigation reveals.

The situation is so bad that massive cutbacks in spending areas including roads, public lighting, libraries, footpaths, parks and other vital local services are inevitable.

But the main political parties have only vague plans on how to address the issue, with no detailed proposals from any on how the funding crisis will be tackled. This is despite warnings as far back as 2006 that councils had to make serious efforts to balance their books and ensure that public money was being properly spent.

Reports seen by the Irish Independent show cost overruns on capital projects, the collapse in the housing market, and the failure of councils to collect money has brought them to the brink of financial disaster.

Despite councils slashing millions from their day-to-day spending, successive cuts in funding from central government and poor financial management are taking their toll. Reports from the Local Government Auditor, who examined the accounts of the country's local authorities for 2009, show:

  • Councils owe more than €4.35bn, borrowed to build housing, water treatment plants, roads, houses and other capital projects.
  • Seven local authorities have yet to publish their audits, meaning the final debt will be higher.
  • Some €730m is owed in development levies -- an increase of more than €300m since 2008. Another €160m is owed in unpaid commercial water charges and rates.
  • There is an oversupply of affordable homes, paid for by councils, which they cannot sell.
  • Dublin City Council has spent €75m so far on the Poolbeg incinerator, but construction work has yet to begin.
  • Three motorways that opened last year have run at least €70m over-budget.

The reports reveal how councils are struggling to keep services in place, and show that major projects including new council headquarters, roads and water treatment plants have run massively over-budget.

Some councils are keeping small local businesses afloat by working out special arrangements with them over their rates they cannot afford to pay.

But others have reached the end of the road in seeking payment and have begun legal proceedings to get the money they're owed.

In many cases, capital projects have been completed -- but there is no money to pay for them and they are being repaid from day-to-day spending budgets. Wexford County Council has moved into new offices in Gorey, built at a cost of €13.8m, but has to sell assets to fund the project.

Cork County Council is paying a loan to build water treatment projects on an interest-only basis.

Last year the Environment Minister John Gormley commissioned a high-level group to look at reforming and restructuring local government.

The Local Government Efficiency Review Group (LGERG) recommended a raft of changes including merging local authorities, introducing new taxes, and cutting senior management, which would lead to savings of €350m a year and generate €150m in new income.

The report, published in July, is still being considered by the Department of the Environment. Both Fine Gael and Fianna Fail will use the LGERG report as a template, which suggested imposing hikes in the cost of a driving licence and increased planning fees.

And the Labour Party believes local authorities could be merged.

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Housing scheme was '85pc complete' when pyrite found - National News, Frontpage -

By Treacy Hogan Environment Correspondent

Monday February 21 2011

DUBLIN City Council was forced to halt construction work on 124 new homes after pyrite was discovered as the project was nearing completion.

Repair works will begin in April at the Sillogue 4 development in Ballymun -- three years after the problem first emerged.

Pyrite, known as 'fool's gold', is a mineral which expands in the presence of moisture and oxygen and causes cracks in buildings. Hundreds of homes in private developments in north Dublin have been affected by the mineral and require extensive works to make the houses safe.

The auditor said the Ballymun development was 85pc complete when the problem emerged.

"One section of the redevelopment, consisting of the construction of 124 new dwellings, has recently been suspended due to the discovery of pyrite," the auditor said. "Extensive remedial works will now be required."

The council confirmed that works were needed, but that work would not begin until April.

The question of who was legally responsible for the problem would be determined "at a later date".

A detailed report on the pyrite-affected scheme has been submitted to the Department of the Environment. The houses form part of the multibillion-euro Ballymun regeneration project.

The audit report shows that the city council spent €63m on the project in 2009. The total cost of the project to date is €808m.

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Friday, February 18, 2011

Countryside in the town.

Yesterday, while showing a house in Ard na Greine, an older residential part of Clonmel, I saw a Hawk kill a small bird in the back garden.

To me, this is an unusual sight, especially in a built-up area.

It is a mature garden all the same!

Foxes are now a common sight around the edges of town and at night in some of the larger housing estates.

Rabbits are numerous, as is evidence of them on some of the Estate green areas.

This year more than ever, there are lots of Hares in the countryside and I have seen some in certain areas of the town.

Am I alone in this?

Has anyone else noticed how it used to be the town encroaching on the countryside, now it is the countryside encroaching on the town.

Wednesday, February 16, 2011

Testing Twitterfeed, sorry!

This is a test.

Labour to ban upward-only rent reviews - The Irish Times - Wed, Feb 16, 2011

Labour says its plans to abolish upward-only rent reviews could save up to 15,000 retail jobs.

The party today said it would enact legislation to abolish upward-only rent reviews as a priority for all commercial leases. As an interim measure, it would appoint a commercial rents ombudsman to adjudicate on rents that had the potential to cause a business fail.

It says the proposals are a response to the suffering of the retail sector resulting from the “property bias” of Fianna Fáil’s economic policy.

Labour says this has seen revenues plunge after the dramatic collapse of the property bubble, with retailers trapped in upward-only leases while consumer demand stagnates.

“These rents were set at the top of the property bubble, so what you have is boomtime rents and recession-time retail incomes,” said Labour’s retail sector spokesman Ciaran Lynch.

Labour published its proposals at a press conference in Korky’s shoe shop on Dublin’s Grafton Street, where the owner, John Corcoran, said he was paying over €500,000 a year in rent on a 35-year lease with no break.

Mr Corcoran said property owners were destroying jobs through upward-only rent clauses and the banks had contributed to the problem by lending money on the lease rather than the value of the property.

Labour’s justice spokesman Pat Rabbitte pointed out that prime rents increased by 240 per cent between 2000 and 2007, while the consumer price index went up by 30 per cent during this time.

Labour was satisfied that a ban on upward-only rent reviews could be introduced through legislation and a referendum would not be needed, Mr Lynch said.

Best of luck with that, lads. Plenty of institutions will fight that to the death!

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Monday, February 14, 2011

Mortgage holders get part of debt written off -

A NUMBER of heavily indebted mortgage holders have managed to get some of their debt written off.

Bank of Scotland (Ireland), which shut down its operations here last year, last night admitted it was working with customers to "restructure their debt in exceptional circumstances".

It had previously denied it was doing any deals with people to allow them to write off some of their debt. The bank, which also had the Halifax brand here, is doing deals mostly with buy-to-let property investors.

However, brokers said a small number of residential mortgage holders had also managed to get some debts written off.

Brokers said the bank was cutting deals with people who were unable to repay the full amount. However, domestic lenders have so far shown a reluctance to restructure the debts of mortgage holders.

It is understood the bank is prepared to reduce the capital owed by people who are in negative equity and have defaulted on their mortgage repayments.

In a statement it said: "It is Bank of Scotland policy that mortgage customers are required to repay their debt in full. The bank will, of course, work with customers to restructure their debt on an exceptional basis and when the bona fides need arises. It is bank policy not to discuss individual cases in public forums."

Michael Dowling of the Independent Mortgage Advisers Federation said he had dealt with a number of instances where both buy-to-let investors and residential mortgage holders who were in trouble had managed to cut a deal, with the bank writing off part of the capital owed.

He said British banks tended to be far more flexible about debt write-offs than domestic lenders. But he stressed that did not mean they were a soft touch either.


"They (Bank of Scotland) don't want people arriving at their door saying 'I owe €250,000. Here is €200,000 now'. But if you are in default, they will do a deal with you," Mr Dowling said.

He added that if the bank knew or suspected you had assets or cash, it would not cut a deal.

Mr Dowling recently helped a borrower who owed €1.8m on a home that was valued at €2.5m at the height of the boom. The house needed to be sold and went for €900,000.

The bank agreed to take the €900,000 and allowed the remaining €900,000 to be paid off over 25 years, interest-free. Repaying the capital only meant that up to €300,000 will be saved by the borrower in interest over 25 years.

"Bank of Scotland has written off Ireland as an entity. If a deal is to be done, they will do it and do it now rather than in 10 to 15 years' time," Mr Dowling said.

- Charlie Weston Personal Finance Editor

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Receiver cuts Cavan prices -

A receiver is about to sell 60 luxury apartments in Cavan town at prices which are only about one third of what they were when first launched.

Located at Farnham Court, close to Cavan General Hospital and the town centre, the one-bedroom units range in size from 47sqm and in price from €70,000 for a ground-floor unit up to €73,000 for second-floor units. The two-bedroom homes range in size from 74sqm and in price from €83,000 for a ground-floor unit up to €88,000 for a third-floor penthouse.

All come with high-quality specifications including under-floor heating, fully fitted kitchens, wooden floors, electrical appliances and attractive bathroom tiling. The two-bedroom units have an en suite in addition to the guest bathroom.

Buyers also have the option of buying furnished units for an extra €3,000 to €4,000.

Because of is proximity to the hospital, the agents, Gunne Reynolds, says there is good rental potential. Some units have been renting in a range of €450/€500 per month for one-bedroom units and €550 to €600 per month for two-bedroom units.

The launch is scheduled for February 19.

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Irish investors sue over Spanish property schemes | The Post

Seventy Irish investors who paid more than €7 million into overseas property developments which were never built are taking legal action in Madrid.

The group mainly small private investors, is part of a wider group of around 1,000 investors from Britain and Ireland who have lost some £40 million.

The purchasers, from north and south of the border, paid deposits - typically of between €85,000 and €120,000 - four years ago for properties in Spain and the Dominican Republic.

A number of purchasers lost far more than these amounts.

Two investors sank €1 million each into the schemes run by Spanish company Sungolf and its director, Ricardo Miranda Miret - one being a development of 350 luxury apartments at the Estepona Country Club on the Costa del Sol, and the other a property development, Punta Perla, in the Dominican Republic.

English-based company Ocean View Properties, which acted as the agent for the Estepona

and sold Punta Perla properties, went into liquidation in August 2009.

Marbella-based lawyer Antonio Flores of Lawbird has lodged a criminal claim in Madrid for misappropriation of funds against the Sungolf director, as well as against the directors, or de facto directors, of Ocean View Properties.

‘‘There must be many other hundreds affected living in Scandinavia, the US and Canada. It will take a lot of work to get funds back, if at all we can," said Flores.

This is only the tip of the iceberg, I would say. There are lots of other investors in Bulgaria, Slovakia etc that will never seee their money back.

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Retail sector wants action on rates and rents | The Post

Retailers have been at the coal face of the recession, with shop closures and job losses linked to unemployment, reduced spending and weak consumer confidence.

With 250,000 people employed in this sector, many feel that the outgoing government has not done enough to protect these businesses. So the sector has pressed general election candidates to deliver solutions to problems such as high costs and boom-time rental agreements.

Retail Excellence Ireland (REI) has come out strongly in favour of the positions being taken by Fine Gael and Labour.

‘‘The policies outlined by Fine Gael and the Labour Party will be central to our economic recovery.

These policies will support jobs, reduce prices to consumers and will greatly assist recovery in Ireland’s largest industry - retail," said REI chief executive, David Fitzsimons.

‘‘The mix of measures proposed in the policies of Fine Gael and the Labour Party address the key issues of commercial rents and wage costs in the retail industry," he added.

‘‘They propose practical and straightforward measures that, if implemented, would provide a significant boost to many Irish retail businesses."

In particular, he welcomed campaign promises by Fine Gael and Labour to ban upward only rent reviews for legacy leases.

The outgoing government banned such clauses in new contracts, but said that the Attorney General’s advice was that intervention on existing leases would be unconstitutional.

However, Fine Gael has proposed that all tenants be allowed to call a review in 2011 and that the upward-only clause would not apply. The party has stated that it will defend its plans in the Supreme Court if necessary.

Labour has proposed legislation to ban upward-only rents altogether. It plans to appoint a commercial rents ombudsman who will have powers now only available to an examiner. Stephen Mackerel, chief executive of the Carphone Warehouse, which has 78 stores in Ireland, said the removal of upward only rent review clauses was a key issue for his business.

‘‘It is the only way you are going to get the economy moving again. Retail accounts for 50 per cent of GDP, so the economy is not going to kick on unless retail moves as well," he said.

REI’s legal advice, he said, was that retrospective changes to commercial leases was constitutional and he was confident there were ways around it.

Mackerel said the outgoing government was not interested in the issue.

Fianna Fáil TD John Curran, who is the party’s spokesman on justice, said any government had to rely on the legal advice it received. ‘‘The advice of the Attorney General was sought," he said.

‘‘Amendments were made to prohibit upward-only rent reviews on new leases, so that’s the future taken care of. But the strong advice at the time from the Attorney General was that wholesale interference with existing leases was not feasible. He said real legal and constitutional difficulties would arise if we were to try and deal with leases retrospectively.

‘‘It wasn’t that we weren’t sympathetic or didn’t think it should be done," said Curran. ‘‘It’s easy to make promises, but this issue has arisen and was dealt with seriously. The advice of the Attorney General was sought and was acted upon."

While opposition politicians have made pledges on the rent review issue, not all legal experts believe that changing legislation is the right course of action.

Professor Sandeep Gopalan, head of the law faculty at NUI Maynooth, cautioned against any rush to change private contracts and suggested that the courts was the proper forum to deal with the issue.

‘‘Alotof people have a kneejerk reaction that banning these clauses will solve all sorts of problems," he said. Gopalan said that state intervention in private contracts could bring other problems with it. It is a complex issue and one which the incoming government may not easily solve.

Other subjects which featured prominently on the agenda of retailers were Joint Labour Committees (JLCs), which set minimum wages for specific sectors. Again, REI has backed Fine Gael and Labour’s positions. Fianna Fáil announced a review of JLCs last week but, for some in the retail industry, this was too little, too late.

Paul Candon, corporate services director of energy company Topaz, which employs 1,400 people, said retail was ‘‘not well at all’’.

‘‘We are going to see far more store closures and far more jobs lost because of the lack of traction from the Fianna Fáil government," he said.

Candon added that the cut to the minimum wage was completely cosmetic, as the minimum wage was still 8 per cent higher than in Britain.

‘‘But we have our sectorial minimum wage so it means nothing to us," he said.

‘‘The message for the incoming government is that we must make this country a viable place to work and to do business.

And we must ensure that the same rules apply to all employers. JLCs are antiquated and need to be abolished." Businessman James Nolan, of the award-winning Nolan Butchers in Kilcullen, Co Kildare, said that top of his agenda was local authority rates.

‘‘The rateable valuation that I pay on my premises here was redone in 2006/2007 at the height of the Celtic tiger. It just isn’t a fair reflection of the economic times we are living in today," he said.

‘‘In tandem with that, the cost of things like ESB charges and waste charges are absolutely horrendous," said Nolan, a member of the Small Firms Association.

‘‘I’m a small business, but it is small businesses that are giving employment. There are 22 people working here and that is huge employment in a small town.

But before you even open the door you have huge rates." In this election, the retail sector - as with many others - is demanding more than ever before. Delivering results will no doubt prove extremely difficult for whoever ends up in power.

The underlying issue for all retailers is depressed consumer confidence, which is inextricably linked to austerity measures and the problems of the banking sector - both of which seem sure to cloud the horizon for some time to come.

This is a very contentious issue for both sides. In the private market, common sense generally prevails, but Institutional investors are very slow to alter their rental demands.

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Bank takes action on buy-to-let customers | The Post

Permanent TSB has intensified its bid to move its buy-to-let mortgage customers away from interest-only mortgages.

However, it has no plans as yet to incentivise a similar move by owner occupiers. A number of the bank’s existing buy-to-let customers received letters in the last two weeks regarding changed terms for their interest-only mortgages.

Late last year, the bank started this initiative, writing to the owners of thousands of buy-to-let properties to advise them to start paying back the capital on their investment property loans or face losing their tracker-rate mortgages.

‘‘Customers retain their current tracker mortgage rate once they agree to move to interest plus capital repayments or, where they choose to remain on interest-only, they will be charged an extra 1 per cent on their current interest rate," a spokesman for the bank said.

He said that the bank had ‘‘engaged with about 1,000 customers’’ regarding buy-to-let, interest-only mortgages up to now.

The spokesman added that Permanent TSB’s bid to move interest-only investment customers to capital repayments was not affected by recent rate announcements by the bank.

‘‘This approach remains for these customers, regardless of other changes to our variable or fixed rate interest rates in the meantime," he said.

The spokesman also stressed that there were no plans for a similar move for homeowners with an interest-only mortgage.

‘‘Some owner-occupier customers do have interest-only mortgages, and there are no plans to extend this

to these customers," he said.

Last week Permanent TSB announced increases of up to 3pe r cent in its fixed rate for existing customers to whom the bank is obliged to offer a fixed rate. It is no longer offering fixed rates to new customers.

Earlier this month, the bank announced a 1 per cent increase in its variable rates.

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Council expected to reverse Gormley on zoning - The Irish Times - Mon, Feb 14, 2011


AN ORDER made by former minister for the environment John Gormley, which directed councillors in South Dublin to change the zoning on land at Carrickmines, is likely to be reversed at a meeting tonight.

The move follows on from a court case when development company Tristor Ltd challenged the legality of Mr Gormley’s order.

The Park Village lands at Carrickmines, close to the M50, had been rezoned to district centre by councillors in the course of drafting the Dún Laoghaire-Rathdown County Development Plan 2010-2016. District centre status would have allowed for greater development at the site.

But an order from Mr Gormley, made in March 2010, directed councillors to reverse the rezoning and return the site to neighbourhood centre status, which allows for smaller development.

In a very tight vote, councillors voted to accept the minister’s order. Tristor then took a judicial review of the decision and last November, the High Court ruled the minister had acted outside his powers and the council was no longer bound by his order.

Mr Justice Frank Clarke directed the council to reconsider the area development plan in light of its findings.

Tonight councillors will discuss legal advice provided by senior counsel Conleth Bradley.

In a document circulated to councillors in advance of the meeting, Mr Bradley advised that councillors had “no discretion to re-debate” the zoning of the land.

“The elected members are required to adopt a resolution, which reflects the lawful position prior to the invalid ministerial direction and nothing else,” he said.

The resolution, provided by county manager Owen Keegan, will effectively return the site to district centre status.

Meanwhile, Green Party TD Ciarán Cuffe has called on councillors to reject a proposal that would allow a retirement village to go ahead at the foot of the Dublin mountains, at Ticknock near Sandyford.

“Some councillors believe that we should revert to the short-term ‘all development is good development’ mantra of the past regardless of where it is located,” he said.

But local resident Fiona Capaldi said her father, who suffered a stroke last year, was in need of such a facility. She urged councillors to vote for it.

“If they developed a retirement village there it would give my parents and others like them some choice,” she said.

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Wednesday, February 9, 2011

Breaking free from the prison of negative equity - The Irish Times - Mon, Feb 07, 2011


PERSONAL FINANCE: Negative equity can prevent trading up or trading down, but in the UK lenders are now offering creative solutions to the problem. In Ireland, more informal agreements are sometimes available to help homeowers out of a locked-in situation

IRISH HOMEOWNERS trapped in negative equity may have read with envy that UK banking group Lloyds is now offering an escape route to customers with underwater mortgages through its new Equity Support Scheme.

The deal allows customers of Lloyds TSB, Halifax and Cheltenham Gloucester to use their savings as a deposit towards a new property, rather than using them to plug their negative-equity gap. No additional borrowing is allowed, but this niche product will assist people where a move is a necessity.

Although no such over-the-counter offering has been officially launched in the Irish market, some lenders are quietly facilitating customers on a case-by-case basis.

David Duffy of the Economic and Social Research Institute (ESRI) estimates that the number of borrowers in negative equity reached 300,000 at the end of 2010, based on a peak-to-trough fall in property prices of 40 to 45 per cent. The majority are first-time buyers who purchased close to the peak.

Because this group tended to take out 100 per cent mortgages, any dip in the value of their property immediately pushed them underwater. Many of these homeowners now wish to move on or trade up, but find themselves unable to do so because the proceeds from selling their property would be nowhere near enough to pay off their mortgage.

Last summer, it emerged that a number of lenders in Ireland were looking at introducing negative-equity mortgages. This typically allow borrowers to carry over the excess amount owed to their bank onto a new mortgage.

However, in July the Central Bank called a halt to this, contacting all mortgage lenders and requesting them to stop offering negative-equity mortgage products.

The Central Bank was concerned people could dig themselves further into debt, and end up overexposed and struggling to meet their repayments.

Most mortgage lenders informed the

Central Bank that they did not intend to introduce this type of product. However, a small number of lenders said where an existing customer approached them requesting some type of arrangement involving negative equity, they might consider advancing a mortgage but only on the basis that it would be in the best interests of the customer and the institution.

Strict criteria relating to net disposable income, loan-to-value ratios, income multiples, credit histories and so on would have to be met in any such cases and agreed in advance with the Central Bank.

The Central Bank has banned lenders from actively promoting or advertising this type of arrangement, but if a customer’s situation meets the necessary criteria they may be able to assist them.

There is anecdotal evidence that this is now happening, albeit on a limited basis.

Frank Conway, a director at the Irish Mortgage Corporation, encountered one woman whose marriage had broken down and her husband had moved out of the family home. As she was unlikely to be able to meet the full mortgage repayments on the property herself, she was looking at selling it.

The outstanding mortgage on the property was €380,000, but the house, which was bought at the height of the boom, had fallen in value to about €220,000. This would leave a negative equity hole of €160,000. She discussed the predicament with her lender, and they came up with a deal which would allow her to move on. If €220,000 were realised from the sale of the house, it would be offset against the mortgage. The balance of €160,000 would be converted into an unsecured personal debt, which she would be allowed to repay on the same terms as the original mortgage (ie, over 32 years, and at her existing tracker rate).

Conway was also contacted recently by a financial professional who had borrowed about €1.7 million to buy a house which he was now forced to sell because of a change in his personal circumstances. He was being offered just €900,000 for the property, which would leave him €800,000 underwater.

His lender offered to “cut him a deal” that took into account the fact he also owned multiple investment properties. The bank would allow him to sell his home and chip away at the resulting €800,000 deficit, repaying just €500 a month for 25 years. As this would only wipe out a fraction of the amount owed, he would have to make a large balloon payment at the end of the 25-year term to repay the balance. The deal was structured on the presumption that the customer’s circumstances would improve in the intervening years, but it was also secured on his investment properties, which could be sold if necessary.

According to Conway, banks are getting customers to submit detailed information on their income and expenditure and are “vetting” these figures “very thoroughly” to see if people are genuinely in difficulty, and that there is a real need to move on.

In his experience, banks are not writing off negative equity debt, but in situations where people are facing the type of circumstances outlined above, lenders “have little choice but to show some sort of ability to work” with the customer.

Ronan Lyons, economist with property website, says the option to “bring the [negative equity] debt with you” should be available in the Irish market where appropriate, for instance, if an individual is in secure employment and is looking to move from a small apartment to a house because they have started a family.

“The new government should be looking to make sure that where possible negative equity isn’t a stumbling block to getting a new mortgage,” Lyons says.

He also says if the negative equity problem becomes “severe enough”, the government should consider introducing income-tax breaks for people who have to let out their home in order to rent another property that better suits their changed circumstances.

Duffy says while negative-equity mortgages can facilitate people who need to move house and therefore “add some mobility to the housing market”, they have to be looked at carefully as there can be downsides.

For instance, if the borrower is trading up, they can end up with an even higher loan-to-value ratio.

The Government’s expert group on mortgage arrears and personal debt has recommended that lenders should give further consideration to facilitating trading down by borrowers in negative equity, as this could reduce their mortgage debt and result in more affordable monthly repayments.

For the moment, though, lenders are constrained in what they can do.

The upshot is that for most homeowners trapped in negative equity, there are only three realistic options: use every spare penny to pay off the debt overhang; get tenants into their current home and rent another property; or avoid crystallising the loss by staying put.

The new government should be looking to make sure that, where possible, negative equity isn’t a stumbling block to getting a new mortgage

Can't see why the Central Bank won't allow theses mortgages. At least, it will let people move to secure jobs.

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Shutting up shop - The Irish Times - Mon, Feb 07, 2011


TROUBLE ON THE HIGH STREET: Retailers are under threat from all sides – consumers with less to spend; landlords and their punitive upward-only rents and out-of-town superstores looking to hoover up any available business. It’s tougher than ever for our shopkeepers

THESE ARE very tough times for Ireland’s shopkeepers. Just how tough, was illustrated by a report published last month which said that 400 shops would have to close for good during what was the worst January in living memory.

In the days after the report came out, some of what was contained within came to pass as high profile stores like Zhivago Records in Galway and Waterstone’s Bookshop in Dublin announced they were in serious trouble.

If there was one thing Irish shops did not need to kick-start 2011 was a weak January, coming as it did on the back of a nightmare before Christmas.

Pre-Christmas trade in Ireland was badly damaged by heavy snow at the start of the month and in the week before December 25th. The harshest budget in the history of the State and the gloom caused by the IMF bailout did not whet people’s appetite for a seasonal splurge either.

While weak consumer sentiment and bad weather hit retailers hard, what is causing many independent shop-owners more grief is the existence of upward-only rent agreements – leases which, effectively make it illegal for shop keepers to try to renegotiate their rents downwards, no matter how bad business gets or how low the value of the property they are renting falls to.

Imagine how hard it must be to own a shop on a busy street and watch your rent increase by as much as 500 per cent in 10 years because of upward only rent reviews, only to wake up one morning to find a shop selling almost exactly the same products has opened next door and is paying just 10 per cent of the rent you are, and charging prices you can never hope to match.

Such scenarios are playing themselves out across the State.

The report which said that 400 shops would close this month was published by Retail Excellence Ireland (REI). It represents more than 8,500 shops and has pleaded with any new government to take immediate steps to save the retail sector.

Its chief executive David Fitzsimons recently told Pricewatch that the outgoing Government had focused on the collapse of the banking sector at the expense of the rest of the country.

“The domestic economy is being left behind,” he says. “The retail sector accounts for 50 per cent of GDP and the reality is that the Government can not expect the economy to recover unless the retail sector recovers. I know we can’t improve consumer sentiment overnight, but a new government can address certain issues which may help the sector.”

Speaking as the REI report was launched, Stephen Mackerel, chief executive of the Carphone Warehouse and a member of the organisation, accused the outgoing Government of cronyism in failing to take on developers who were demanding inflated rents. He said that if retailers were in a position to renegotiate their rents downwards, prices for consumers could fall by between 6 and 8 per cent almost immediately.

Mackerel described January as the worst in the shop’s history. “Footfall was down at least 20 per cent on last year and last year was in itself a real shocker.” He said that of his 77 stores, landlords have only entered “into any sort of meaningful sort of negotiations” in seven of them. “The rest have just given us the two fingers”.

Mackerel says that if upward-only rent reviews were scrapped, the retail sector could provide 30,000 news jobs and drop their prices by between 6 and 8 per cent. He says, quite reasonably, that the most effective way to stimulate demand among would-be shoppers is to entice them through the doors with lower prices. While an incoming administration may look towards changing the rules, the outgoing one certainly did not.

One of the final acts of the last Oireachtas was the publication of a report into Ireland’s retail sector. At its launch, Willie Penrose, the chairman of the committee, said that although it had spent three years investigating the sector, it never got around to discussing the issue of high retail rents despite admitting it was one of the biggest threats facing Irish retailers and could cost tens of thousands of jobs.

Penrose accepted that the issue of upward-only rent reviews was a serious problem but claimed the committee had not discussed the issue formally because “we did not anticipate that the report would have to come out so quickly.”

Keeping rents high and forcing businesses to close does not, however, make sense for landlords, surely?

Yes and no. While no landlord wants to see a tenant vacate a premises because they have gone out of business, nor do they want to see the value of their investment decimated because the rental income falls off a cliff.

Industry sources say that some developers are massaging the figures. If they can convince Nama that they are getting €10,000 in rent for a property, but are actually only able to get a tenth of that, then theoretically that property is worth 10 times more than it otherwise might be. The problem is however, that first the retailer goes out of business, then the developer goes bust and finally the taxpayer picks up the bill. No-one wins.

While rent is one issue that threatens to kill Ireland’s indigenous retail sector, another shadow looms almost as large on the horizon in the form of massive supermarkets springing up on the outskirts of our towns.

On many levels such developments are to be welcomed as prices will fall – at least in the short term.

The downside ultimately will be a diminution of choice and the possible destruction of our town centres. In the US, Walmart has laid waste to many town centres. The same thing is happening in the UK with Tesco, Sainsbury’s and the Walmart-owned Asda opening huge supermarkets selling everything from flat-breads to flat-screen TVs and fresh fruit to washing machines and driving business away from towns out into the suburbs.

Things in Ireland are moving that way. The Tesco Extra stores sell toys, hardware, electronics, prescription drugs, clothes, groceries, alcohol, books and a whole lot more. While the prices are competitive, the service in such stores can be found wanting.

Last week, Pricewatch wandered the aisles of one such shop for quite some time looking for a staff member who could shed any light at all on the dizzying array of TVs on the shelves. There was no-one to be found.

According to Fitzsimons, there is “going to be a big shift in retailing and a big shift in power, with more and more of the money going to huge supermarkets on the outskirts of our towns and this could kill town centres completely.

“Our industry is going the way of the US where 70 per cent of the market is controlled by just three players. The big name multinationals can come in and demand their own terms and conditions when setting up and this can leave the smaller guys screwed.”

As smaller shops trade is swallowed up by hypermarkets, choice will be diminished as will customer service. Even now shops are being forced to make hard calls and many can’t afford to employ the extra staff to give customers that extra bit of service. “There are some electrical retailers who could afford to employ maybe 15 per cent more staff to offer advice and give them the edge over online retailers but can’t because high rents offer them no flexibility. So consumers are taking the hit twice in the form of worse customer service and higher prices,” says Mackerel.

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