Archive for February 4th, 2010

Today’s Irish Times reports that a new report will be published this month which will shed more light on the relevation by NIRSA last month that there are upwards of 300,000 vacant homes in the State (NIRSA says total homes 1.985m, vacant homes 0.303m vacant plus 0.049m holiday homes – their methodology has been criticised in some quarters as being based on “sweeping assumptions”). The UCD work is set to establish that the stock of vacant homes in higher than the NIRSA estimate (which in turn was higher than the DKM estimate, though DKM’s estimate on a like-for-like basis was somewhere in the mid 200ks and not 100-140k as reported).

Will the UCD study be any better in terms of accuracy? Well this author thinks it will still be difficult to assess vacancies because of perceived difficulties in assessing holiday homes – 49k holiday homes (from the 2006 census) is 2.8% of the total stock and is about 1/3rd of the EU average and is therefore viewed with caution. Personally I think the demand for holiday homes in the state could naturally be less than average due to Ireland’s temperate wet climate which deters those who want guaranteed sunshine or snow. Also the number of properties bought without mortgages is a cause for concern, NIRSA think it was minimal, DKM ran senarios with assumed percentages in the 30% range.

However given the statement “Dr Brendan Williams, lead author of the UCD report, told The Irish Times that “our figures might be higher”,  again given supply and demand economics prices for homes should fall.

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Yesterday, Minsister for Finance Brian Lenihan fielded a question on NAMA in the Oireachtas in which he assured us “Work in several major institutions will be finalised in respect of major lenders [sic] at the end of this month,” He means “borrowers” not “lenders”, right?

Separately, according to the Independent today, that newspaper has “learned” that the first loans transferred to NAMA may have a haircut of 40% (to summarise again, there are toxic loans in 5 institutions on assets originally worth €88bn on which there are loans of €68bn plus rolled up interest of €9bn which were estimated to be worth last September €47bn and a further €7bn was to be paid in “long term economic value” – €54bn as a proportion of the €77bn loans and interest was 30%, now that discount has been “learned” to be 40% for the first tranche of loans which if replicated across the other loans would mean NAMA would be paying out €46bn and not €54bn).

So when will the first dollop of public money be paid over to the 5 institutions? That’s not clear yet. Mr Lenihan said yesterday that by the end of February 2010, NAMA should have established what it can pay. The EU must still approve the NAMA scheme and according to the Sunday Business Post, NAMA itself has some administration to complete itself as well  as attracting some private sector funding for its SPV apparatus. It was indicated in that news story that the first dollop was expected to be paid out by the end of March 2010.

Whilst it is interesting that some of the loans may need additional due diligence work to establish precisely what is securitized, what will be more interesting is how these first loans will be valued. When will we “learn” (using the Independent’s nomenclature) that?

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