Archive for February 10th, 2010

According to IPD, some parts of Dublin are seeing improvements in yields on offices which roughly translates into better rental prices in this case – “I expect a positive total return for the year, I do not think that will exceed the income return” according to the Society of Chartered Surveyors.  Meanwhile  according to IPD “Irish yields are now making investment more attractive as the yield gap has improved to 320 basis points above the risk free rate offered by the 10 year Government bonds.”

The report shows however that poorly located offices continue to see sharp falls. It will be interesting to see what assets NAMA takes over and where they are located, though we must always remember that the prospect of the NAMA white knight may by itself lead to a short-term blip which is not supported by economics fundamentals.


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Yesterday, Bank of Scotland announced that its Irish Halifax subsidiary would withdraw from the Irish retail banking sector BUT that it (BoS) would concentrate on its Irish business banking arm. It was stated that “There is no strategy for this business that will see it achieve break-even or profit in a realistic timeframe” and “Unfortunately, Halifax is simply too small to succeed in this contracting market” as a result of the financial crisis and the recession.

The retail business is about deposits and loans. According to recent reports we are saving more as a nation than we have for a long time “Irish consumers are saving nearly four times as much now as they did at the height of the economic boom.  People put away 11% of their income last year, compared to just 3% in 2007, according to figures from the UCD Smurfit Graduate Business School and the Marketing Institute of Ireland. And we are also borrowing less – personal debt dropped 21% in the 12 months to last November. [29.1.10]” However our borrowings are reducing fast both with personal loans, mortgages and credit cards. With falling property prices and more negative equity, mass unemployment and falling wages and more taxes, of course we’re saving more and spending less (14% less according to CSO statistics released yesterday comparing full year 2009 with full year 2008). The demand for mortgages is for residential property which continues to fall off a cliff (3.6% fall in December 2009 according to ESRI).

Is the problem with consumers that they don’t want credit or that credit isn’t available? It would seem to this author that consumers are avoiding personal discretionary spending though there is reputedly a demand for mortgages, but with property prices dropping 10% per annum and some saying that prices will drop another 50% from present values, what bank will advance more than a 50% LTV loan?

Does the BoS decision to focus on business banking mean that this sector does not need government intervention through NAMA as the private sector is perfectly capable of meeting the needs of viable businesses without government bail-outs?

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