Airplane!

Remember that scene from the great 1970s movie Airplane! when the plane is eventually about to land and someone pulls the plug on the airport landing lights as a joke? This is how I felt at the decision today by ESRI and Permanent TSB to stop publishing the monthly house price index and instead to publish statistics on a quarterly basis (the next one in April 2010). We knew that prices were dropping at an accelerating rate in the final quarter of 2009 (indeed down 8.5% since September 2009 when Brian Lenihan called the bottom of the market and down 3.6% in the month of December 2009 alone). Did the December 2009 trend continue and are prices down another 8% since then?

So NAMA is going to buy the first tranche of loans without even knowing how the State’s main price index has been performing for the two previous months! Turning off the lights indeed – good luck valuers at NAMA!

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“The transfer [of loans to NAMA] is happening at very fair and honest valuations”

So says Patrick Honohan, governor  of the Central Bank of Ireland this morning in Cavan. Indeed there are very qualified people in NAMA and NAMA will be advised by the top players in the property industry. How though can you have “fair and honest valuations” when the markets have largely seized up and where there appear to this author to be significant signs that prices are being propped up consistent with market manipulation –

unspecified overhang of unsold residential property (300,000 – NIRSA, >300,000 – UCD). The NIRSA study leaves open the possibility that vacant homes are being hoarded or withheld from the market until prices improve. The UCD study may shed more light on the subject of hoarding

deferral of recovery actions on residential property (>30,o00 mortgages restructured). Yes banks are bring socially altruistic and of course what is the point of putting repossessed distressed assets on the market now when the last available statistic is that prices dropped 3.6% in December 2009.

mortgages being denied below certain levels to deter purchases of cheaper housing. I do not have accurate statistics on trends or position but it is fair to say that there are a substantial number of properties at the €100,000 asking level or thereabouts on DAFT which would not qualify for mortgages from many banks because they are too cheap.

deferral of large scale commercial recovery actions which might lead to distressed property appearing on the market

In addition,

deferral of implementation of Register of actual land and property transaction prices which might obviate estate-agent puffery – this was recommended by the Kenny Report in 1973 and has been promised for some time. 36 years later we’re still waiting.

It will be post-April 2010 when the population figures are released for 2009/10 and of particular concern is migration which turned negative last year for the first time in 15 years and has anecdotally accelerated since then. I’m betting on a population reduction, the first since 1990.

I would again call on FG to lobby to have the first tranche of loans pared back and a quick review of the valuation methodology and modus operandum of NAMA to ensure value for money for taxpayers.

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Restaurant rents (re-visited)

Ever been to a Milano restaurant? I have and think they’re a pretty good quality and reasonably priced restaurant group with very good service. However I was more used to going to Pizza Express restaurants  (as the Milano brand is known in the UK). Same food, exact same food, same good quality but the prices are apparent 20-50% lower than in Ireland. Here, compare the two menus and see for yourselves (I used an exchange rate of GBP 1 = EUR 1.15).

Milano

http://www.milano.ie/our-food/mains.aspx

Pizza Express

http://www.pizzaexpress.com/our-food/mains.aspx

Why the difference? Here's what the National Consumer Agency had to say

"A number of factors can affect the total price that a consumer is asked to pay for products
or services in different markets, for example, VAT and the costs of doing business in
different markets.

Where there appears to be an unacceptably large difference between the sterling
and euro price of a product, if the option is available consumers should choose to
buy elsewhere, having informed the retailer that the difference in price is unacceptable
to them.

There is no price control in Ireland, apart from certain limited areas such as utilities
and postage. Government policy in relation to prices is one of encouraging
competition, price transparency and the promotion of greater price awareness among
consumers."

I am reminded of our rents today as we learn that 80% of the 2500 licensed restaurants
operating in the country are operating at a loss and the owners are blaming 

1. Rent
2. Wages
3. Local authority charges including waste

How much longer than these 2000 restaruarnts continue to trade at a loss
and how soon will their vacated premises be offered up to the market?

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New housing completions fall off cliff in January

Well new private sector housing completions in developments fell of the cliff to 149 in the entire month of January, comparing with say 8000 during the boom,is there a concern that we’re not building enough homes for our population and that prices should maybe start increasing??? Homebond which shares it address with the Construction Industry Federation only registers private sector housing. It only registers multiple housing completions – not one offs.

The government estimated about 10,000 housing completions in 2010 and we are still some way off seeing whether that figure will be reached – by the way we don’t know the number of public sector and one-off houses completed in January so we may well be on track. Getting hard information in the State untainted by someone’s vested interest is a challenge.

I also look forward, perhaps this week, to the publication by UCD of its report into vacant property in the State where we are likely to learn there are well in excess of 300,000 vacant properties.

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Enda, wake up and start acting like an Opposition

We know that Enda Kenny, the man who revitalised FG after the disastrous 2002 general election, is a fan of the Mayo Gaelic Football team. Using a football analogy therefore, why is the entire FG party on the 65 metre line staring at Senator Eugene Regan (FG’s Agricultural specialist) making all the running up to the far goal with his two EU submissions?  Okay, the submissions are likely to be rejected but should he not get a little more support,though if by chance the submissions are upheld (even in part) you won’t be able to hear yourselves think with the deafening thunder of the FG party running up the field to partake in the glory.

Maeve Dineen in today’s Irish Independent attempts to go back to basics and ask about NAMA’s function and how abysmally it is thus far delivering. She claims to describe the purpose of NAMA as “to quickly save the banking system in a fair and transparent manner so that the banks could begin lending once again”. Well, if we had a functioning Opposition they would have demanded detail from the government, metrics, SMART (ER) objectives and the Opposition would now be testing Government policy against reality and perhaps getting kudos for it.

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