Wednesday, October 26, 2011

Capital values down again in Q3 - The Irish Times


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.

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Monday, October 17, 2011

Squatter told he can stay in NAMA ghost estate home -

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.


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

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Anglo turns screw on professionals in debt -

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.


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

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.

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

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

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

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.

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The day of reckoning beckons for investors -

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.

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Almost 19,000 completed new properties lying empty -

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

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Wallace loan to block ACC getting his home -

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.


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

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.

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


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.

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Monday, October 10, 2011

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

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

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

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.

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New laws to slash rents for inviable businesses -


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."

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


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.

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Tuesday, October 4, 2011

Common sense has no place in NAMAland | Irish Examiner

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.

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How low can house prices go? - The Irish Times

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, 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.

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80% of mortgage applications are refused | Irish Examiner

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.

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Nama plan too big a gamble for taxpayers -

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.

Posted via email from quirkeproperty's posterous

Irish house prices continue to fall - The Irish Times

Asking prices for houses continued to fall in the third quarter of the year, according to new reports by rival property websites., which is owned by The Irish Times, said that house prices fell nationally by 3.2 per cent between June and September, while said that prices declined by 3.5 per cent.

Prices in Dublin have fallen 42 per cent from their peak in 2006, according to, while puts the figure at 48 per cent.

Nationally says house prices have declined by 42 per cent, while says that the figure ranges from 40 per cent to 50 per cent.

The average price for a house nationally stood at €241,000 at the end of September compared with €249,000 three months earlier, according to

In Dublin, the average price of a house had fallen to €275,000 in September from €286,000 three months earlier, the website said.

Over the year, asking prices for houses fell 13.8 per cent nationally and 15.2 per cent in Dublin, according to’s survey.

House prices in Cork fell the most over the three months, dropping by 5.9 per cent, while prices in Galway fell by 3 per cent.

“Irish consumers remain cautious due to international and domestic concerns,” said Annette Hughes, director of DKM Economic Consultants, author of the report released by

“On the one hand, they are worried about the euro financial crisis and its impact on economic and employment growth prospects, while on the other, they are concerned about household finances as well as continuing difficulties securing mortgage finance.” said the average asking price for a house was just under €195,000 compared with €366,000 at the peak of the market, which it said was in 2007. Asking prices fell by an average of 4.5 per cent over the three months with prices 55 per cent below peak in some parts of the city.

Prices dropped by up to 5 per cent in Cork and Waterford, while there were some of the smallest falls in the third quarter were recorded in Limerick city.

Houses in Galway rose in price, increasing by just over 1 per cent during the summer, but were still down 18 per cent over the previous 12 months, said. “Conditions in the property market remain weak,” said Ronan Lyons, economist at Daft.

The market had to deal with over-construction and a correction in the relationship between house prices and rents, but now had to cope with a lack of credit, he said.

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