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Archive for March 9th, 2011

According to  Savills last Autumn, development land prices in the Republic of Ireland have fallen 75-90% from peak. Beyond this, there have been individual cases where falls have been greater, for example the 7.5 acre field in Athlone which was valued at €31m in 2006 but in 2010 was assessed to have been worth only €0.6m, a decline of 97%. The biggest individual fall, in terms of euros, that I have seen here is the €362m (90%) drop in value of the Irish Glass Bottle site bought for €412m in 2006 and now worth only €50m. But a report by the Northern Ireland Audit Office this morning details a case that beats the above percentage-fall records : the 84-acre plant and seed testing facility at Crossnacreevy, less than 10 kilometres south-east of Belfast city centre.

The full audit report reveals that the property, which is owned by the government agency the Agri-Food and Biosciences Institute, was valued at “in excess of” GBP £200m in June 2007 and is today assessed as being worth only GBP £2.28-5.87m – indeed taking into account an estimated GBP £6m relocation costs, the property is effectively valueless as a sale for development. On the back of the GBP £200m valuation, the government in Northern Ireland paid out GBP £121m in grants to farmers to combat fertiliser leakage into waterways. If it were not for the elevated valuation, then the implication from the audit report press release is that these grants would not have been affordable and would not have been made. So the Northern Irish government has not lost GBP £198m with the decline in the property’s value but it did spend far more than it should have based on an understanding that the GBP £200m valuation would be realised.

What makes this relevant to NAMA is that the agency has taken on some €4bn of loans secured on property in Northern Ireland, and €2.4bn of this is undeveloped land. It is not clear how much NAMA has paid for loans secured on development land in Northern Ireland but it must be hoped that valuations have taken account of the fact that the collapse in development land values is not confined to the 26 counties.

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