Vendors will now have to be more realistic about their asking prices for their homes following publication this week of the property price register. That applies not alone to those who ask much more than market value but also to those whose guide prices are too low.
Understandably most vendors usually want to get the best price possible for their home and traditionally most guide prices advertised for properties were pitched well above the likely selling price.
In the first few years of the market downturn, however, vendors were still in a mindset that had not acknowledged the pace at which prices were falling. Consequently those over-priced properties which were well above the new reality were left unsold for months if not years.
Then along came the Allsopspace auctions last year and the new reality began to sink home with vendors. Soon afterwards other agents began to learn from the Allsop experience and advised those vendors who wanted a relatively fast sale that they needed to slash their asking prices.
Not alone did these moves pay off in attracting viewers to the realistically priced homes but they also sparked increased competitive bidding so that properties in sought after areas have been selling for over their guide prices and recent surveys show Dublin price rises.
Furthermore in this week's Allsopspace auction a number of regional homes sold for well over their guide prices such as the three-bedroom terraced house at Tarmonbarry, Co Roscommon which sold for €141,000 or as much as 156pc over its €55,000 guide.
Just as future prospective buyers of adjoining properties will be able to use auction results to gauge their offers, the property price register too will provide prices from private treaty sales to guide prospective bids.
However, the property register comes with a health warning. Already the National Property Services Registration Authority (NPSRA) which compiles the register has acknowledged that it has made mistakes such as the instance of the two Limerick properties which the register indicated had been sold for millions when in fact they sold for only a fraction of that.
Nevertheless Tom Lynch, chief executive of the NPSRA, said that the mistakes applied to only about 20 of the thousands of prices shown.
But it is not just mistakes of which the site's users need to be wary. There can also be deals done by family members engaged in sales between each other at substantial discounts to the market values of adjoining properties.
In addition, the prices shown may reflect the much different condition of the properties.
For instance take Brookwood Crescent area in Artane, Dublin 5. Since the start of the year four houses sold on the crescent. One of these, Number 12 sold for €90,000 in January and another, Number 31, sold for €80,000 in August which on face value appears to be a price drop.
However a local agent also sold two other houses in August, and the register shows that these three bedroom houses sold for more than treble. Number 35 sold for €262,000 and number 36 sold for €285,000. The agent says that the register's prices for numbers 12 and 31 do not reflect the market reality for houses on the crescent.
So while the new price register is widely welcomed as helping to make market prices much more transparent, buyers still need to compare more than just prices when they are shopping around.
- Donal Buckley
Tuesday, October 9, 2012
The price register is a mixed blessing - Independent.ie
Dublin property agent faces strike-off - The Irish Times - Fri, Oct 05, 2012
ASSURED PROPERTY Management Ltd, a prominent Dublin property management agent, has been listed for strike-off by the Companies Registration Office.
The Irish Times has learned that a number of apartment management companies have terminated their contracts with Assured in the last few weeks.
Property agents like Assured are appointed by apartment owners, through their management companies, to manage the communal areas of apartment complexes, including the organisation of refuse collection, gardening and general maintenance.
Winton Asset Management Company, the management company for Fitzwilliam Court apartment block in Ranelagh, wrote to the owners of the apartments in August seeking an immediate levy of €750 to allow the company to continue managing the property.
“The company is in a desperate financial situation,” the letter states, and payment is imperative “otherwise the electricity supply will stop, the block insurance will cease and the refuse collection will stop”.
The most recent accounts for Winton Asset Management Company, for the year ended March 2012, show that the company was owed €56,408 by Assured Property Management Ltd at the end of March 2012.
Winton made a provision of €46,522 for the sum in its 2011 accounts, and a further €9,886 in its 2012 year. It is continuing to “endeavour to recover the amount owed”, the accounts state.
Similarly, latest accounts for St Helens Wood Management Company, which runs St Helen’s Wood apartment complex on Booterstown Avenue, shows that the company was owed €70,224 by Assured Property Management at the end of March 2011.
The accounts for St Helens state that service charges from some property owners were paid directly into Assured Property Management’s accounts, rather than St Helens Wood Management Company and the “payments by the company to APM Ltd are in excess of the value of invoices”.
Assured Property Management was established in 2001, and is believed to have managed more than 40 apartment complexes and other multi-unit developments on behalf of management companies at its peak, though most of its clients have terminated their contract with the company, with the fall-off accelerating in the last six weeks.
The directors of Assured Property Management are Ben Haskins and Orla Fitzpatrick. A spokeswoman for the company said yesterday that “any allegations of overpayment are being dealt with by our solicitors and accountants”.
Most apartment owners are shareholders in their mangement company.
While historically developers maintained control of these management companies, the multi-unit development act introduced last year required developers to hand over ownership of all common areas of apartment complexes to owners by September 2011.
Other apartment complexes that have recently terminated their contracts with Assured Property management are the Smithfield Gate complex in Dublin 7 and Dorset Square apartments in Dublin 1.
World comes crashing down on Irish developers' global empire - The Irish Times - Sat, Oct 06, 2012
SIMON CARSWELL and MARY CAROLAN
TWO OF the State’s most ambitious developers, Johnny Ronan and Richard Barrett, will see the end of their globe-spanning company, Treasury Holdings, next week after conceding defeat in litigation taken by one of its banks.
Liquidators are expected to be appointed on Tuesday to the insolvent property business by the High Court after the company said it was no longer resisting an application by KBC Bank to have the company wound up over a debt of about €55 million. The rejection of a last-minute offer by US bank Morgan Stanley to buy the company’s debts from the State’s National Asset Management Agency (Nama), which supported KBC’s action, has led to the imminent failure of the group, sources close to the company said.
One of Nama’s top 10 debtors, Treasury has total debts of €2.7 billion, including more than €1 billion with the State loans agency.
Mr Barrett and Mr Ronan have given personal guarantees on a small amount of Treasury’s debts, while Mr Ronan has his own property portfolio and related debts with Nama.
Mr Barrett and Mr Ronan turned Treasury from one of the State’s biggest developers into an international business with projects in Britain, France, Sweden, Russia and China.
Treasury was behind landmark projects, including the five-star Westin and Ritz-Carlton hotels in Dublin and Wicklow, the Convention Centre in Dublin’s docklands, and the Central Park and Spencer Dock office complexes in Dublin.
The hotels and offices will remain open as they are solvent despite the pending liquidation of the parent company. The Convention Centre is owned by the State.
The High Court was told yesterday that, given Treasury’s decision not to fight the winding-up application by KBC, the bank will seek to appoint Paul McCann and Michael McAteer of accountants Grant Thornton as joint liquidators of the company and 16 related companies next week.
Lawyers for the Belgian-owned bank said the winding up of 17 companies was necessary given the scope of Treasury’s property interests.
Nama rejected an offer by Morgan Stanley to buy the group’s debts and an alternative proposal that Mr Ronan and Mr Barrett step aside to allow Treasury be sold by public tender, sources said.
The company felt it had no option but to accept the liquidation of the business as it believed Nama was unwilling to accept any scenario where Mr Ronan and Mr Barrett would remain as owners.
A spokesman for Nama said it had no comment to make.
Relations between Treasury and Nama fell apart earlier this year in a dispute over the agency’s rejection of offers to buy the group’s debts and the decision to seize properties within the group.
Treasury lost a court case in August aimed at stopping Nama.
The court was told yesterday that KBC did not accept an explanation for a transaction in which assets of a subsidiary of Treasury had been transferred to a company in the Channel Islands beneficially owned by Mr Barrett.
Negative equity loans -- the rise of the 175% mortgage - Independent.ie
Many homeowners in negative equity are so desperate they'll clutch at any straws. Buyer beware.
With the collapse of the property market people don't have the option of selling and moving on -- the sale proceeds would never clear their mortgage.
However new mortgage products (now being offered by four lenders) seem at first glance to offer homeowners in negative equity a chance to move on. But maybe these products shouldn't be clutched at too eagerly -- if at all.
Negative equity mortgages let you sell your home and carry over whatever debt is left on a previous mortgage onto a new loan.
Recently AIB and the EBS became the latest lenders to offer negative equity mortgages. Up until then, Bank of Ireland and its subsidiary ICS Building Society were the only lenders offering the loans.
KBC Bank doesn't yet offer negative equity mortgages. However, "the bank is examining the possibility of introducing a mortgage which would be aimed at customers in negative equity," as part of its plan for dealing with those in mortgage arrears, according to a spokesman. Ulster Bank doesn't offer the mortgages either but "is keeping this under review". Although National Irish Bank doesn't offer negative equity mortgages, it intends to by the end of the year.
Permanent TSB only offers negative equity mortgages "in exceptional circumstances", according to a spokeswoman. "Permanent TSB has advanced a small handful of negative equity mortgages to customers who are considering trading down," added the spokeswoman. "The bank is considering whether to make a negative equity mortgage available to other customers."
With Bank of Ireland, ICS, AIB and EBS, you can borrow up to 175 per cent of what your new home is worth -- but a good chunk of that is the negative equity you'll carry over. You can't borrow more than 90 per cent of the price of the new property with BoI and ICS, and the most you can borrow, including the negative equity carried over, is €550,000. You must have a mortgage with BoI for at least two years "with a satisfactory track record" to qualify.
With AIB and EBS, you can borrow up to 92 per cent of the value of the new property -- and the most you can borrow, including negative equity, is €700,000. If the mortgage for your new property is more than €400,000, you can only borrow up to 85 per cent of the property price -- if the mortgage is for a one-bed apartment, you can only borrow three-quarters of the property price.
Such mortgages might be music to the ears of an owner who bought an apartment during the boom -- and who has had children since.
THE DRAWBACKS
Taking on a mortgage equivalent to 175 per cent of what your property is worth however could be one hell of a noose around your neck -- unless property prices explode over the next few years.
"If people think 100 per cent mortgages were a bad idea, I can't grasp how a 175 per cent one is a good idea," says Karl Deeter, compliance manager with Irish Mortgage Brokers.
Negative equity mortgages allow banks to avoid taking any hit from a property they have financed the purchase of which has since collapsed in value, according to Michael Dowling, of the Independent Mortgage Advisers' Federation.
"When you take on a negative equity mortgage, you are paying for the loss the bank has on its own books," says Dowling. "Is it right that people should take on the negative equity that has built up on their home? Negative equity mortgages mean the bank gets its money back for a property. Some argue that the banks should take some kind of a hit."
Another drawback of negative equity mortgages is that you will lose any tracker mortgage you had on your previous home. This means that you will not only be taking on a larger debt, but a more expensive one. The mortgage interest rates available today could be as much as three times as expensive as a tracker rate.
Dowling believes that only a tiny portion of homeowners will qualify for negative equity mortgages. The high level of debt carried over means anyone applying will need a high income to qualify. Banks are also stress testing mortgages to ensure you could afford the repayments were interest rates to hit 6 or 6.5 per cent.
If you are in mortgage arrears or having difficulty meeting the repayments on your current mortgage, you're unlikely to get a negative equity mortgage.
THE ALTERNATIVES
Even if you do qualify, you might be better off financially if you pursued a different path.
Dowling believes it could make more sense for a homeowner in negative equity to sell their home -- and rent, rather than buy.
"If you sell your home and the sale doesn't clear your mortgage, you may be able to come to an arrangement with your bank to write down the outstanding debt," says Dowling. "Homeowners in negative equity need to do their numbers before taking on a negative equity mortgage. Instead of buying a new home with a negative equity mortgage, they may be better off selling their home, dealing with any negative equity left over from a house sale as an unsecured loan -- and renting another property as the family home."
If you are in negative equity and likely to be left with a substantial balance on your mortgage after selling your home, your bank may not allow you to sell it, particularly if you're planning to rent another home rather than take up a negative equity mortgage.
However, if you're having difficulties repaying your mortgage, and the bank allows you to sell your home, you may be able to come to a personal insolvency arrangement with your bank for any loan left outstanding. Under the Personal Insolvency Bill you can cut a deal with your bank to repay unsecured debt of up to €3m over six years.
Another option is to rent out your home to tenants rather than sell it -- and then rent another property as the family home.
- Louise McBride
Wednesday, October 3, 2012
Who will buy distressed properties? - The Irish Times - Wed, Sep 26, 2012
The volume of properties now coming up for sale could push down prices even further and frighten off potential buyers unless decisive action is taken to set a floor to the market, writes BILL NOWLAN
LOOKING THROUGH the long and growing list of secondary and tertiary commercial property coming on the market from banks and their receivers, I wonder to myself who is going to end up owning such buildings and if the volumes now emerging will impact negatively on current delicate property values. Values have been stabilising of late, but the absence of bank credit to support purchases makes the situation even more dangerous.
The traditional investors in such properties, before the madness set in the early 2000s, were of three types as follows:
Firstly, the professional investor with significant holdings of secondary assets and usually with their own property management office because, believe me, such assets are management intensive and usually require lots of TLC. Such professional investors work mainly below the radar and have a policy of investing in properties such as shopping centres, older office buildings and small industrial estates many with weaker tenants. These portfolios would generally be high yielding at 10 per cent-plus and borrowings would be limited.
Secondly, you have the location-specific investors. This type of operator tends to be confined to their “home” town. Often it is the local pharmacist or butcher who quietly builds up ownership of the buildings on his street or town – sometimes over several generations. They tended to use the profits from business, surplus rent and their pension funds to put together what becomes a type of informal family trust. Such property investors are everywhere in Ireland – in every town and village – but as to their ability to buy, currently many will be suffering economically and have limited funds to purchase new stock, no matter how cheap.
The third type of investor was and is the individual or family either setting up a new portfolio or maybe in an inherited situation. Usually such portfolios have no real coherence but are put together more or less by osmosis. For example, if there are some surplus funds from profits or inheritance they go into buying whatever is then on the market. This type of portfolio would be different from the two types mentioned earlier in that it would be random and unstructured and rarely focused or well managed. Its unspoken strategy would be wealth accumulation in bricks and mortar, and possibly tax management.
The overriding characteristic of all these investors would be low borrowings, high cash yield and, of course, vacant space – the current rate of vacant space probably being high.
Look across most developed economies worldwide and you will see the same three classifications of property investors. I am deliberately omitting the institutional investor as they require prime property and I am also omitting the quoted property companies and REITs who do hold considerable amounts of secondary properties. Ireland has no quoted property sector mainly for the taxation reason of income being double taxed. I have dealt with this in greater detail below.
So this was the situation up to the year 2000. After that date a new type of investor arrived into this market with a bucket of borrowed cash, greedy advisers, bank managers with no or poor judgment, a belief that the property boom would go on forever and often unrealistic expectations. Property in secondary streets or towns became classified as “prime”, and pub chat, gullible bankers, greed and a cycle that lasted too long all induced this “new” investor to believe that such properties were great long-term opportunities.
The enthusiasm to own property and the limited supply pushed yields down from 10 per cent-plus to less than 5 per cent over the space of a few short years. Rents also rose in response to the real activity in the economy. Values often more than quadrupled as yields went down and rents went up. A property that sold for €50,000 in 1996 and was changing hands at €300,000 by 2007, is now worth €100,000 or less if it sells at all.
Of course, it was all an illusion because secondary or tertiary property does not, or rarely, changes its location or its structure. The new “value” was in the intoxicated minds of the buyers. Trees don’t grow to heaven. Many of the vendors of such properties were from one of the old groups of investors who were delighted to sell poor property at thrice its cash flow related value. As one old investor said to me in 2004, “It’s a great time to get the junk out of my portfolio”.
But it has all come crashing down and while some of the traditional investors may have caught the stardust bug, most did not and are sitting more or less as they were in the year 2000– but with rents back and income back to 2000 levels or lower – and still going on sun holidays and not generally in serious trouble with banks.
But back to my original question of who is going to end up owning such buildings and whether the volume now emerging will impact on current delicate values?
It will almost certainly be the same old group that was there before the madness, but where is the cash going to come from for the large volume now emerging on the market? Looking at the results of the Allsops auctions I see only one new category of investor emerging which is the overseas investor, usually an expat buyer with equity, who sees value in such properties in Ireland. The reality is a new form of category one, two or three described above.
The big question is can the large supply match the demand or will a growing supply and limited buyers drive prices down?
Nama appears to be withholding big volumes both of prime and secondary commercial property from the markets and the banks should be considering the same approach. In my view, the banks should be thinking about setting up their own holding funds or vehicles to take such properties into their own “warehouse” and then release them later, as and when the market can take them. Forcing down values now even further will achieve nothing and will frighten off what buyers are there. Such action would set a floor to the market. One big British bank, RBS, has already set up such a fund called West Register and is acquiring properties in Ireland that don’t meet the reserve prices. RBS owns Ulster Bank here.
Such properties generally give a much higher yield than their cost of funds and by moving from the distressed side of the banks’ balance sheet to the normal loan category, it releases working capital.
While if REITs had been introduced some time ago, we would by now have a sophisticated quoted property market which could take up some of this property. This is what happens in the rest of Europe and the US. Such REITs give a high yield to investors and if they were now operating in Ireland would be quite capable of buying some of the bigger secondary properties that may be outside the capacity of individuals to digest. Enabling REITs now in Ireland won’t create a quick fix today but may enable bank vehicles such as Ulster’s West Register to have a vehicle for emptying their “warehouses” in the medium term. An announcement about introducing REITs in the forthcoming budget would be most welcome news.
Bill Nowlan is a chartered surveyor and town planner. He is managing partner of property asset management company W K Nowlan Associates