Is the residential property market being artificially propped up until after the banks get past the point of no return?

Dr Brendan Williams at UCD has confirmed to me today that their report into vacant homes in the State which was heralded last week by the Irish press, will be published online by the end of February 2010. Co-incidentally this is still the public estimate of when NAMA will buy the first loans (“The Point of No Return”).

Today, Bank of Ireland finally sought legal proceedings to foreclose on a substantial residential property loan. All being well for BoI it will have possession of the property assets in the next 1-2 months and they can then presumably be placed on the market. Why it has taken so long to recover the property is unclear. And it seems to this author that there have been precious little recovery actions so far (compared with the many 10s of €billions of loans advanced –  NAMA loans were estimated to be €68bn for example). The effect of this perceived tardiness is the supply to the market of these property assets has been delayed and therefore prices paid in the market place today, particularly at the consumer end, are artificially inflated. Surely this is not an intention on the part of the banks?

The stay on repossessions and the large number of mortgages that are being restructured (30,000 reported last week) all defer these properties coming on the market as distressed assets which would have the effect of reducing prices more. Are banks being led by social altruism or are they waiting for NAMA to make the first payments and get past the Point of No Return?

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Exactly how many vacant homes are there?

Whilst most observers seemed to have accepted as accurate the recent NIRSA study which asserted there to be 302,625 vacant homes in the State plus 49,000 holiday homes, I was reminded today that two years ago there was quite a paddy between CIF and Homebond on one hand (and one address apparently) and Irish Property Buyers Association on the other where it seemed more reliable to see the number of vacant homes at 250,000.

Of particular interest to this author is not only how many vacant homes are there in the State but why are they not on the market. Are sellers waiting en masse for NAMA to pass the point of no return by setting prices for residential property and then “fixing” the market for the Exchequer so that losses are not realised by selling below those prices?

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“We’re not Greece – we will get through this crisis”

As a counterpoint to the slogans on Greek protestors’ placards last week which said “We’re not Ireland – we will resist”, it seems that the Irish efforts in tackling the budget deficit of nearly 13% are being well received by international markets – remember we slashed €4bn or thereabouts from public expenditure in 2010 and announced a commitment to slash another €3bn next year (to be announced in Budget 2011 in November 2010) and then €6.5bn from 2011 – 2014 bringing us back to a deficit of roughly 3% of GDP.

Yesterday’s bond issue of €1.5bn by NTMA was oversubscribed 2.8 times indicating an appetite for Irish bonds. It has also been reported that Brian Lenihan is advising the Greeks in respect of their austerity budget and their overall attempts to rein in a similar budget deficit as Ireland’s (and indeed as the UK’s – 13% or thereabouts in all cases).

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Residential mortgages at lowest level since records began, residential rents rise by 1% in January 2010.

Two snippets from the residential property market provide somewhat divergent news on how residential property is faring. Mortgage lending fell off the cliff in the final quarter of 2009 and is at the lowest level since records began – okay records only began in 2005 during what was a relative boom so not so much can be taken from that headline. The number of loans made was 45,000 of which 15,000 were for people topping up their mortgage and releasing equity in their homes (remember not everyone has negative equity and prices are only back at 2003 levels so if you bought then or before chances are you still do have equity in your home). The other 30,000 mortgages were for both first time buyers and movers and could represent as few as 15,000 homes being actually bought. Information on the number of homes bought without a mortgage is known by the Land Registry but is not released. Note the trend worsened as the year progressed.

Today DAFT.ie published their regular review of the residential property rental market. Relying on asking prices for properties advertised through its websites, DAFT have calculated that asking rents on average rose by 1% in January 2010, the first rise since January 2008. It should be noted the report is based on asking prices. Settled or actual prices are secreted away with the PRTB (who have a record of every rental agreement in the State with actual prices) who refuse to disclose such information on Data Protection grounds despite the fact they could easily hide an individual address and produce reports by region. It should be noted that prices typically do jump in January or in a downward market the fall in January is less than the trend. The following are the daft indices for the past few Decembers and Januaries.
Dec/Jan 2010                  75.4 to 76.5
Dec/Jan 2009                  89.0 to 88.5
Dec/Jan 2008                  100.6 to 101.7
Dec/Jan 2007                   93.9 to 95.7
Dec/Jan 2006                   87.9 to 87.6

The latest rise of 1.1 is equal to the rise between Dec 2007 and January 2008.

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