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Archive for September 1st, 2010

It must be hard for those whose livelihoods depend on property transactions to remain optimistic with what seems like an never-ending stream of negative news on the Irish property market. Today property giant and arguably NAMA lead-valuer, CB Richard Ellis, publishes its periodic review of the Irish commercial property market and whilst commenting on a modest actual increase in activity in 2010 compared with 2009, it foresees increased transaction levels in the months ahead.

CBRE say that NAMA and banks will bring property to the market this autumn which will raise the possibility of firesales and winter bargains. The IMF has previously urged NAMA to dispose of property sooner rather than later and with fewer performing loans than originally expected, NAMA may need dispose of property now unless it is to go back to the Department of Finance again with the begging bowl.

Elsewhere the report states that there are 40 hotels in receivership (and indeed the Irish Hotel Federation recently predicted that there would be a total of 100 hotels in receivership by the end of this year). When added to the 35 NAMA controlled hotels in Ireland (sure the debtors might nominally be in charge but it is NAMA that pulls the strings), it looks like 1/6th of all hotels in the State will be doing business on a survival basis at the end of this year – this might be the year to treat the family to a hotel break for Christmas though be careful with any booking deposit.

The report claims that prime office rents in Belfast are 60% (yes, 60%) below (yes, below) prime rents in Dublin. CBRE fear that the murmurs of a 12.5% corporation tax rate for Northern Ireland may lead to an exodus from the State or radically alter location plans for those considering Ireland. Of course the 12.5% Corporation Tax rate seems to have been put on the back burner by the UK who seem to have trouble working our how a separate rate for NI would fit with the Azores Convention which allows a state to have different tax rates as long as they can stand on their feet fiscally (ie they can balance their taxation and spending) – unlikely for Northern Ireland you would have thought which depends on a massive financial subvention from Britain to operate. However tax rates aside, a 60% differential in rent is eye-opening.

I’m sure there are many that will share CBRE’s hope of an upswing in activity as it may herald a stabilisation of prices and give NAMA a much-needed boost to its loan values.

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This morning the Financial Regulator published the latest statistics for Q2, 2010 on residential mortgage lending in the State. Over 36,000 of the 789,000 mortgages in the State are in arrears over 90 days, 4.6% of the total. The very low level of repossessions continues with 101 repossessions in the quarter bringing to 397 the total for the 12 months to the end of June 2010. The full report should be available from the Financial Regulator’s website later today.

The statistics exclude the number of mortgages which have been restructured which are estimated at over 50,000.

Recent increases in standard variable interest rates which account for 35% of all mortgages together with rising unemployment (reported this morning to have risen to 13.8% in August from 13.7% in July 2010) are likely to put further pressure on mortgage holders though the proposed new rules on arrears and repossessions may soften the effect on repossessions.

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Due to return to the High Court on 7th September for the confirmation of its examinership application in respect of a number of its companies, housebuilder and NAMA-bound developer McInerney Holdings yesterday unveiled its results for the first six months of 2010 and they make for interesting reading.

Total losses (including €6m exceptional losses relating to its Spanish subsidiary Alanda and exchange rate losses following sterling’s appreciation against the euro and McInerney’s substantial borrowings in the UK) totalled €20m. The company did not impair its holding of property assets at all for the first six months (2009 full year impairment was €267m) – Irish residential property declined by 6% approx in the first six months, the UK rose by 5% approx and the company owns more UK property so that might be reasonable. Savills have recently reported that development land is now 75-90% off peak values in Ireland so one might question the lack of a further writedown in respect of McInerney’s substantial land holding in Ireland.

NAMA itself is not mentioned once in the report, though McInerney do refer to the “unexpected withdrawal of support” by Irish banks in August 2010 which apparently prompted the application for examinership. NAMA has been reported to have been unsupportive of McInerney restructuring plans and apparently imposed its will on McInerney’s NAMA banks (Anglo and Bank of Ireland). There is also no direct mention of Oaktree Capital though Goldman Sachs engagement to assist with its restructuring is described – there being speculation that Oaktree may be considering a €30m investment in the company.

As regards the two main property markets where McInerney operates: Ireland and the UK.

Ireland

McInerney claim that there is evidence of a “levelling off” in prices in “good locations”. There was a 14.5% fall in the average price of the 49  homes sold in Ireland year-on-year though the mix of property types might skew that one way or the other. The average home price in the first six months of 2010 was €195,000 excluding VAT compared to €228,000 for the same period in 2009. The cost of an average plot of land in Ireland is now €28,000 though it is not clear how big the plot is or whether it has planning permission or access to services. 80% of its “sales on hand” relate to Part V social housing – the State it would appear is practically the only buyer. The group completed just 49 houses, less than 2 a week in the first half of 2010. The company still has almost 5,000 plots, half of which have planning permission and 1,000 are a “strategic land bank”.

UK

Average house price sales values rose from £108,000 to £128,000 year on year. The company completed 200 units in the first six months. The average plot price is £29k and there are 456 sales in hand. The company has over 2,000 plots.

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