A property price database for private homes is the next logical step to reviving the property market, writes PAT IGOE
BUYING and selling a house is well known as easily the most important transaction in most people’s lives. Yet, if you were buying a kettle, it would be easier to get accurate and reliable price information.
The Irish property market has traditionally been starved of accurate information. Privacy has been a major issue. As noted by the Supreme Court in Kennedy and Arnold v Ireland, the right to privacy is one of the fundamental rights of the citizen.
But this absence of official information on house prices is now at last set to change. We think.
It would appear that advice to the last government and also to this Government suggest that publishing certain accurate information on individual house-sale prices will not be unconstitutional.
A possible amendment to the Data Protection Act, excluding house-price information, may be the most that will be required.
The easiest way to see what we have been missing is to examine what others have been enjoying. Britain’s HM Land Registry has a price index that is user friendly and informative. Checking it is a “must-do” for anyone interested in accurate and official prices in any neighbourhood or street anywhere in England or Wales.
Its website, landregistry.gov.uk, is consumer-friendly. Go to “find a property”, pay £4 and print-off a “title register”, which will include the actual prices paid for houses on your road. The records go back to 1995. France, the Netherlands, Belgium, and Norway are also leading the field. Ireland is taking up the rear.
Frank Daly, chairman of Nama, is the latest person to call for accurate house-price information to be published. Speaking last week, he said that it was “now high time we got on with it”.
He noted that we are now one of the few exceptions internationally in not having a public database of information on residential and commercial properties.
He noted, correctly, that the infrastructure is already in place. The information has been supplied by solicitors around the country on a daily basis for years for every house or apartment sold or even passed within a family, when an estate agent’s estimated open-market valuation is also submitted. But there the information is stored.
It is quite a jump from private information from solicitors to the Revenue Commissioners to being published on a Government website.
The Senate elections are the current logjam. Once they are over this month, a select committee can be immediately appointed to take the long-awaited Property Services (Regulation) Bill beyond committee stage. “Progress can be quickly made . . . as soon as the select committee is in a position to deal with the Bill”, according to the Department of Justice, Equality and Law Reform.
If properly implemented and marketed, the change may have a momentous and very helpful effect on the now-moribund property market.
So what can we expect? The Property Services Regulatory Authority, which has existed in Navan, Co Meath since 2007 but which still has no authority, will be given the role of publishing the information.
Its chief executive, Tom Lynch, has said that the register will provide details of all property sales by reference to address, sale price and date of sale. We can only hope that it will be consumer-driven.
Estate agents have also long been calling for a transparent property market where details of sales are available on the internet.
They warn against the new system simply providing broad general information, while Sherry FitzGerald would like to see the system backdated for comparison purposes. This might be open to serious legal challenge.
Even the old reliable Permanent TSB/ESRI monthly survey of prices has had to go quarterly because of a lack of reliable market information. Trinity College’s associate professor of finance Brian Lucey has even described the lack of property data available to improve discussion of the property market as “astonishing and appalling”.
One concern on the promises of the new property market’s transparency is that the property price database will be delayed unnecessarily by bureaucracy.
So far, there is input from many government bodies including the Department of Finance, the Department of Justice, Equality and Law Reform, the Property Services Regulatory Authority, the Central Statistics Office, the Law Reform Commission, the Property Registration Authority, and the Revenue Commissioners.
Now, perhaps, Frank Daly is right – it is high time we got on with it.
Wednesday, April 27, 2011
Property investor - The Irish Times - Thu, Apr 21, 2011
Measures to avoid a further property disaster - The Irish Times - Tue, Apr 26, 2011
MARTIN WALSH
ANALYSIS: Some very specific lending, regulatory and planning changes need to be made to avoid another property crash in the years ahead
THE CRASH has shown the destructive nature of a property bubble and banking crisis. While there was an international background, very specific Irish beliefs and conditions were behind its severity, as Nyberg has shown. Given the damage caused to our competitiveness, economy and sovereignty, our banks, environment and to individuals’ finances, we must now erect strong defences against any continuing vulnerability to a similar future disaster.
This is not just a question of bashing bankers, burning bondholders, roasting regulators and punishing politicians. It goes far deeper. The relationships between the zoning and planning process and the profits to be made from development also influenced the intensity and duration of the bubble.
We must change fundamental beliefs and the way we organise much of our governance and decision-making. In addition we need independent structures for reviewing, auditing and reporting on the appropriateness of key policies and on the execution of those policies.
In particular there is a range of changes that affect housing and housing finance that should be introduced.
Low interest rates, lower taxes, higher incomes and easier availability of loans stimulate demand and lead to higher house prices until a supply response brings them back in line with long term value.
There are two key roles that the State must play. It should ensure that automatic regulatory stabilisers severely restrict the supply of finance to prevent unsustainable short-term spurts in demand and consequent price inflation until there is a supply response.
It must also have measures in place so that, as in the case of every other commodity, the market is convinced that a readily available supply can hit the market to take advantage of higher prices. Remember car prices did not increase just because there was plenty of easy money.
It may sound like heresy, but increasing house prices are fundamentally bad for the economy.
The house prices to incomes ratio should remain within a narrow range.
If there are signs that it is deviating from the long-term average – perhaps by 20 per cent to 25 per cent – certainly far before the deviation reaches 150 per cent, the Financial Regulator must introduce restrictions on property finance that apply to all lenders, both domestic and foreign. This assumes that incomes have remained internationally competitive. If not, action should be taken even sooner.
The Financial Regulator should also introduce criteria for the valuation of houses for mortgage purposes based on capitalisation of the net rental value of the property. In the absence of other collateral, all lending over 80 per cent to 90 per cent of this valuation should be treated as unsecured and would be subject to higher capital adequacy requirements.
Alternatively, all lenders based and regulated here would be required to take out additional security, by way of mortgage indemnity cover, from a highly rated insurer based outside Ireland, for the excess over 80 per cent of the valuation.
Such action should be backed up by reform of the housing market, particularly in the areas of zoning and planning. As the agricultural price of the land on which the average-sized dwelling stands is less than €1,000, virtually all the site price depends on the implied value of the building permission where the house is located.
While overall political direction is required, zoning and planning have such a large effect on house prices and the economy that an autonomous body, reporting to the Dáil, similar to the Central Bank, should be responsible for all strategic planning decisions.
Decisions should not be influenced by short-term electoral considerations or patronage. The body’s remit should be to restrict all housing developments that impose high servicing and other costs on the economy, as well as on families faced with moving into areas with minimal services and having to endure the cost and strains of lengthy commutes.
On the other hand, its mandate would require that at all times there would be a substantial supply of zoned and serviced land, in all key urban areas where it is most needed, and expensive infrastructure is already in place.
In order that no perceived shortage will arise in future, or that any interests can corner the supply and ensure that there will be competition between site owners, a supply adequate for at least 20 years should be maintained. As part of achieving this objective, aside from zoning new land, the rezoning of brown-field sites and significant areas of existing lower density housing would be prioritised.
The final reform that is required is a revision of our bankruptcy laws. No economy or banking system could function if everyone could walk away from their debts. Banks would always lose money and no sane person would trust banks with their deposits.
After the collapse of the bubble and increased unemployment, there are many in debt to levels that are impossible to escape from. This includes those who borrowed for purposes other than buying a home. The key reform required is a reduction in the period before a bankrupt may be discharged.
In general cases, in the absence of evidence of reckless or dishonest financial behaviour, the period might be reduced to three or in some cases two years.
With similar provisos, in cases in which the debt is almost exclusively due to a mortgage for a home taken out during the worst excesses of the bubble, a court might be permitted to discharge a bankrupt within one year, and in exceptional cases immediately, particularly if mis-selling or misrepresentation could be proved.
Taken together these measures would ensure that both house prices and rents would remain more stable and in line with incomes. Consequently housing would be more affordable for both purchasers and renters. Above all there would be a systemic improvement in the stability of the banks.
Such actions would make it clear that we are determined to manage our economy and finances in a sensible manner and are worthy of remaining core members of the world’s largest and most successful economic area.
Thursday, April 14, 2011
Thursday, April 7, 2011
HSE office block for sale for €7.05m - The Irish Times - Expected yields now at least 9-10%
JACK FAGAN
An office investment for sale near the Phoenix Park will test the level of demand from investors
A MODERN office investment rented by the Health Service Executive (HSE) near the entrance to the Phoenix Park at Parkgate Street, Dublin 8, is expected to test the level of demand from investors when it goes on the market today through Savills.
Michael Clarke of the selling agency is quoting a price of €7.05 million for the four-storey building which will provide a net return of 9.4 per cent after costs.
The sale comes shortly after the HSE headquarters at Millennium Park in Naas, Co Kildare, was sold for almost €9 million in a deal which will show a yield of 9 per cent. Also in the past week the Layden Group paid €9.25 million for an office building owned by the Swedish telecoms equipment maker Ericsson at Clonskeagh in Dublin 4.
The signs of renewed activity in the Dublin investment market comes at a time when some of the main agents are reporting a pickup of inquiries from cash investors who were fortunate enough to have sold properties before the market crashed.
A number of receivers are due to bring development sites and buildings onto the market in the coming weeks.
There is also increasing speculation that Nama will shortly have to begin offloading some of the large number of commercial buildings with distressed loans for which the State asset manager has taken responsibility.
The most valuable properties are likely to be of interest mainly to overseas buyers with the support of European banks. However, large scale sales are unlikely until the Government clarifies whether new legislation planned for later this year will introduce downwards reviews in existing leases.
The HSE office block at Parkgate Street is being sold by KPMG receiver Kieran Wallace on behalf of ACC. It is one of four blocks in Parkgate Business Centre developed by a subsidiary of Michael Murphy’s South Dublin Construction.
The block is on the opposite side of the River Liffey from Heuston Station and close to the recently completed Criminal Courts complex.
Other occupiers in Parkgate Business Centre include the Railway Procurement Agency which rents 4,000sq m (43,056sq ft) in two buildings. The Royal Bank of Scotland is another high profile tenant.
The building going for sale – Block D – was constructed in 1996 and has a floor area of 1,830sq m (19,698sq ft) over four floors. It forms part of a larger block of two similar buildings and is served by two 10-passenger lifts.
The HSE has the use of 21 car parking spaces in the basement.
The block is let to the HSE on a 25-year full repairing and insuring lease from December 2001. The current rent of €715,000 per annum is due to be reviewed at the end of this year.
The HSE has a break option in the lease in November 2016, subject to 12 months’ notice and the payment of a full year’s rental penalty if exercised. The lease has a period of 6.7 years before the break option arises.
Michael Clarke said the sale would give an investor a very attractive cash-on-cash return with income secured by the HSE. The completion of the vast Criminal Courts had generated demand for office accommodation in the immediate area from members of the legal profession.
The HSE building in Naas, Oak House, was sold by agents Murphy Mulhall for property developers Tom Considine and Paddy Sweeney who paid over €300 million for the 370-acre Millennium Park at the height of the property boom in 2006.
Swords accountants Houlihan Cushnahan, acting for a group of investors, paid €8.99 million for Oak House which has a floor area of 3,716sq m (40,000sq ft). The rent of €880,000 per annum will show a return of 9.05 per cent. The lease has more than 16 years to run.
Michael Clarke advised the purchasers in this case.
From The Irish Times - "Court 16 is final line of defence."
Defaulting borrowers are finding sympathy in the High Court as the legal battle lines between lenders and borrowers are played out, writes PAT IGOE
CASES of serious mortgage arrears now coming on every Monday before the High Court leave little doubt that the courts are sympathetic to borrowers in difficulty. This is clear from the approach and treatment by the judges where lenders are seeking possession of homes with mortgage arrears. The rights and role of the courts are limited, although the courts are testing these limits. In doing so, the judges are also helping to clarify the legal battle lines between lenders and their defaulting borrowers.
Last week in the High Court, Ms Justice Mary Laffoy heard arguments for a Clare publican, Elizabeth Floyd, that the sub-prime lender Secured Property Loans Limited should not be given possession of her pub/home because of her mortgage arrears. The high interest rate was unconscionable and oppressive, argued her counsel, Brian Sugrue BL. It constituted a penalty and unjust enrichment for the lender.
But, critically, the judge noted that it was for the Oireachtas, and not the courts, to regulate interest charges. While it was understandable that Floyd had an obvious sense of grievance over the level of debt that she was facing, the court had no jurisdiction to give her relief in respect of the high interest charges.
Ms Justice Laffoy clarified a number of significant points. Firstly, she noted that Floyd had received independent legal advice. Secondly, she took into account factors in respect of the interest rate, which did appear high. These included the size and time period of the loan, the creditworthiness of the borrower and the security offered to the lender. These would have to be considered in whether a bargain between a lender and borrower was unconscionable.
Other recent court cases highlight the broad range of defences that defaulting borrowers may argue. They fall into two broad categories. First is the argument that there is a fundamental flaw in the mortgage documentation such that there is no legally binding agreement between lender and borrower at all or that, if there is, that it should be cancelled by the court because of errors.
The array of very carefully-drafted documents which lenders now require borrowers to sign before any loan cheque is produced, have hugely reduced, almost to nil, the chances of this argument succeeding. Alongside this are arguments that the borrower was the subject of coercion or oppression or deceit. But the usually strict requirement of independent legal advice usually sees all of these arguments off.
The second category is considerably more helpful to borrowers where the court can give more time to regularise the position with the lender. The courts come into their own in requiring the lenders to comply with the law’s strict procedural requirements.
In the High Court, the lenders’ first required port of call is the Master of the High Court, Edmund Honohan, brother of the Central Bank governor, Professor Patrick Honohan. He regularly requires the lenders to amend any defects in their court submissions and file necessary affidavits and decides on adjournments of up to 10 weeks. Little or no sympathy is given to lenders with defective court paperwork.
After the Master’s Court, the lender must then go to High Court number 16 where Ms Justice Elizabeth Dunne initially hears most of these cases. She listens to arguments from the borrowers as to their difficulties. Even where the documents are entirely in order, she can and does put “stays” of a further three months or six months and occasionally even longer to give the borrowers time on possession orders. These decisions are on an ad misericordiam basis and require the cooperation of borrowers with the process.
The judge has also punished lenders by exposing them to costs when they have rushed to the High Court in Dublin when a local Circuit Court with lower costs would have been adequate.
Critically, the courts can slow down the process where eviction is the final destination. Where the borrower is engaging with the lender, then the lenders must now give defaulting borrowers at least 13 months after the first mortgage repayment default before even commencing proceedings.
Court 16 is the final line of defence of borrowers and comes after various required procedures under the Financial Regulator’s Code of Conduct on Mortgage Arrears. A revised code came into effect on 1st January this year. All mortgage providers are required to comply with its provisions, including a mortgage arrears resolution process that is as fair and constructive as possible.
In the “last-chance saloon” in the Four Courts, the judges can and do provide some final protections to borrowers in difficulty and require that every reasonable chance be given to save people’s homes. But, beyond that, the original agreement between lender and borrower will be respected.