Just over a year ago, the media described an auction in Kilkenny with 20 lots as “mega”. At that auction, some two properties sold on the day and it seemed clear that buyers and sellers were still too far apart in Ireland for deals to be struck. But fast-forward a year, with the country in the grips of an IMF/EU bailout, unemployment touching 15%, mortgage arrears and restructurings over 10% of all mortgages, interest rates rising, banks showing us what “deleveraging” means in practice with the withdrawal of new credit, a population that is stagnating at best, an overhang of vacant property put at over 100,000 homes, forbearance measures by banks expiring, the exit from the Irish market of Bank of Scotland (Ireland) and an anaemic economic outlook and you’d have to say that on the Kuebler-Ross scale that we might be nearing the depression/acceptance stages.
There is certainly the prospect of a large volume of new property coming onto the market in coming months. First of all, there are auctions. And if 20 lots in Kilkenny last year was “mega”, what superlative will be use for auctions with over 100 lots? Here are forthcoming multi lot auctions
GMAC – 62 properties, 24th June, 2011
Gunne – 12 properties, 30th June, 2011
Allsop/Space – 87 properties, 7th July, 2011
Savills – 100 properties, 29th September, 2011
In addition NAMA has announced that it expects to make available a new “negative equity” mortgage product in the Autumn. The agency has not confirmed how many of its properties will be made available with the NAMA mortgage but there has been speculation (not confirmed by NAMA) it might be 5,000.
There are some 23,000 homes on so-called “ghost estates” that are complete and vacant, and an additional 20,000 at varying stages of construction. The latest Ghost Estates report this week makes recommendations for dealing with these estates and one such recommendation is “utilizing housing stock for low-cost sale”. Your heart may sink at the prospect of a new quango dealing with legacy issues in Ghost Estates but it seems that somehow, some property (which was built to be sold) might make it onto the market.
And there are innovative ways of dealing with the unsold overhang of property, the receivership website sale for example. There is some evidence of NAMA’s developers also bringing property to market at last.
Make no mistake, there has been a colossal struggle over the past three years between buyers and sellers, with sellers in particular desperate to avoid sales at fire sale prices, when there is apparently evidence that when prices do hit the absolute bottom, they tend to spike up by 20% soon afterwards. It seems that we are about to enter the phase of a more realistic transactions, where the volume of property available will mitigate against the huge distortions that are still evident. The prediction on here in April, on the eve of the first Allsop auction was that in a very short time, the novelty of large volumes of property coming to market would wear off, and that prediction remains. There will still be distorting influences but it seems that by the end of this year, we might finally be entering a realistic general market for residential property inIreland.
NAMA Wine Lake 
Off topic – Anglo sells what’s left of it’s Scottish book http://webcache.googleusercontent.com/search?oe=UTF-8&hl=en&q=cache:RugvB4L-k9kJ:www.propertyweek.com/news/us-backs-scots-in-anglo-irish-loan-sale/5019643.article
@JP, many thanks, this comes on top of reports in yesterday’s WSJ that Anglo is at an advanced stage with the sale of its USD $10bn US loan book
http://www.rte.ie/news/2011/0610/anglo-business.html
Good to hear but mention of a “NAMA mortgage” is worrying. With this and their huge property asset reserves they are in a position to manipulate the market to make their figures look good at the expense of their boss, us, the taxpayer. From a buyers perspective, if you take a mortgage off the person who sells you the house, you are effectively renting, with none of the benefits of maintenance, etc. and, would you rent a house from your moneylender? Not a good deal for the taxpayer, not a good deal for the buyer but a great deal for Brendan McDonagh and Frank Daly.
@NWL
Can you provide some support to the ‘ they (prices) tend to spike up by 20% soon afterwards’ claim given above. I’ve heard it before in the general media but I’ve never seen a paper supporting it.
@John, I will try to locate it again. The first I came across it in Irish media was Minister Noonan, and I believe he was referring to some report from Seattle. You are right to call me on this as I could not locate the report at the time, and in any event would Seattle (home of Starbucks, Washington, USA) be an appropriate comparison.
“Once a floor is established, the international experience is that in a short period of time, the floor lifts to about 20pc above the bottom and it stays there”
http://www.independent.ie/national-news/bargain-time-as-thousands-of-houses-to-be-sold-2621352.html
Leave it with me.
Not sure whether 250 properties properties in Ireland constitutes a flood just yet, but maybe it’s a beginning – although most of the auctions so far have been selling pure rubbish. However they are selling in the States. The following is a recent report in Commercial Real Estate Direct a subscription only service:
Bank of Ireland Taps HFF to Sell $1.5Bln of Loans
WEDNESDAY, 08 JUNE 2011
Commercial Real Estate Direct Staff Report
Bank of Ireland has hired Holliday Fenoglio Fowler to advise it on the disposition of some $1.5 billion of mortgages against commercial properties in the United States.
The portfolio is said to be comprised of some 35 performing mortgages against properties concentrated in New York, Washington, D.C., and Boston.
The bank recently said it had planned to sell its U.S. commercial mortgage holdings by the end of the year as part of an effort to dramatically reduce the size of its overall loan portfolio.
It’s likely that HFF will offer certain loans individually and others as a portfolio. Individuals familiar with the company’s plans said a Boston-based team would spearhead marketing efforts.
Separately, Anglo Irish Bank has hired Eastdil Secured to help it dispose of some $11 billion of commercial mortgages on U.S. properties. Eastdil’s hiring was first reported by the Wall Street Journal.
That portfolio is said to be an even mix of distressed, performing and restructured mortgages.
Eastdil is a unit of Wells Fargo Bank, which is said to have participated in the acquisition and financing of at least one portfolio that Anglo Irish recently sold.
Both Bank of Ireland and Anglo Irish were relatively active lenders in certain large markets while property markets were escalating. They were bailed out by the Irish government in 2009. In recent months, efforts have been launched to dispose of their respective U.S. commercial mortgage holdings.
Bank of Ireland participated in the $350 million of debt that was provided for the redevelopment of the former Filene’s Basement store building at Franklin and Washington streets in Boston. It also was a lender in the $250 million financing for a 1.3 million-square-foot mixed-use project that was planned for Washington, D.C., by a venture led by Forest City Enterprises.
Anglo Irish previously had put out a solicitation to prospective advisers that would have helped it evaluate, and possibly sell what then was a $12 billion portfolio of loans. It previously had hired Eastdil, Jones Lang LaSalle and HFF to help it value some of its loans. It then terminated its solicitation and recently tapped Eastdil to orchestrate sales.
@WSTT, thanks for that. As for your first comment, no 250 properties is not a flood though Allsop/Space will have 2-3 more 80+ lot auctions this year as I understand it. Omitted from the above is NAMA’s intention to put receivership property on its own website in “coming weeks”. THis was announced on 19th May
Click to access Speeches_Chairman_CEO_NAMA_19May2011.pdf
And the following was an exchange in the Dail two weeks ago.
Deputy Sandra McLellan asked the Minister for Finance Information on Michael Noonan Zoom on Michael Noonan if he will engage with the National Asset Management Agency to identify buildings and properties in its portfolio which might be suitable for local sports pitches and facilities; and if he will make a statement on the matter. [13705/11]
Minister for Finance (Deputy Michael Noonan): NAMA has, in the first instance, acquired loans and it advises me that property or other assets securing these loans remain in the possession of debtors unless it takes enforcement action against them. I am informed that, under an initiative currently in preparation, NAMA will shortly include on its website a database of properties which are under the control of receivers appointed to enforce against NAMA debtors (appointed either directly by NAMA or by participating institutions working on its behalf). This will provide a single source of information on NAMA assets which are for sale and it will be updated on a very regular basis. It is expected to be up-and-running within a matter of weeks.
Within the context of its commercial remit, NAMA has made it known that it is open to considering proposals aimed at contributing to broader social and economic objectives, including facilitating public bodies and it has committed to giving first option to such bodies on the purchase of property which is within its control and which may be suitable for their purposes. In these circumstances, NAMA is available to meet with public bodies to discuss any specific proposals that they may have regarding local facilities.
http://debates.oireachtas.ie/dail/2011/06/02/00047.asp
Add the NAMA mortgage in the Autumn and some action on Ghost Estates and “utilizing” some of them “for low cost sale” and the signs are there is to be a flood before the end of the year.
In 1959 the National 3 bed s/d house price was €1,500.The Annual National Average Industrial Wage was €600.You could purchase the above house for just 2 and a half times the Annual Average Industrial wage.In 1973 the same house cost €10,000 and the Average Industrial Wage was €4,000.Again you could purchase the above house for 2 and a half times the Average Industrial Wage.In 1996 the same house cost €60,000 and the average industrial wage was €20,000.You could purchase the house again for 2 and a half times the Annual Average Industrial wage.In 2007 the same 3 bed s/d cost €311,000 and the In 1959 the National 3 bed s/d house price was €1,500.The Annual National Average Industrial Wage was €600.You could purchase the above house for just 2 and a half times the Annual Average Industrial wage.In 1973 the same house cost €10,000 and the Average Industrial Wage was €4,000.Again you could purchase the above house for 2 and a half times the Average Industrial Wage.In 1996 the same house cost €60,000 and the average industrial wage was €20,000.You could purchase the house again for 2 and a half times the Annual Average Industrial wage.In 2007 the same 3 bed s/d cost €311,000 and the Average Industrial Wage was €37,500 NOW IT WOULD TAKE 8.3 TIMES THE NATIONAL AVERAGE WAGE TO PURCHASE IT. So from 1996 to 2007 the national average industrial wage increased by around 100% but house prices increased by about 500%.Clearly Prices MUST fall back to the 1996 levels before they bottom out.A drop of some 65-70% on the CURRENT (2011) National Average house price of €179,000.After all the current price of building a house is now €58.00 per sq.ft.Therefore a 3 bed s/d of say 1,350 sq.ft. would work out at €78,000.-About right – 2 and a half times the national average industrial wage which now averages €31,000.
@SPO, what’s the source for the current cost of building a house – €58 psf. From recollection, rebuilding costs indicated by the SCSI are in the €110-180 psf range. To that you need add site, professional services and builder’s profit margin.
https://namawinelake.wordpress.com/2011/03/21/house-building-costs-in-ireland-update/
There is truth in the statement that there are lies, damned lies and statistics.
I cannot comment on the 50s with any first hand knowledge, so I’ll let it pass except to say that at the time, the country was enduring a major recession and emigration was at a high.
In 1973 one had to queue for 6 months just to get a mortgage application form and then it was only received if one had been a regular depositor for the past 18 months – so there was no market at the time and prices had fallen from 14,000 (Pounds) for an 800 to 880 sq.ft. 3 bedroomed semi (without garage). No spec house was built that exceeded 1,400 sq.ft. and at that size they were 4 bed, not 3, because over that size you lost the grant and stamp duty remission.
There were houses sold in Dublin at 7,995 (Pounds) by Brennan and McGowan, but they were unpainted, had no doors and no wardrobes or kitchen units (except the sink). The purchasers had to finish them off themselves.
The NET on-site current cost of building a 1,000 sq. ft. 3 bedroomed semi detached house with minimum finish, on a level site, is €85 per square foot.. That excludes roads, sewers, drains, water, electricity connections, footpaths, on site (back of footpath) development and landscaping, local authority levies, planning contributions and expenses, architect’s and engineer’s fees, legal fees, site purchase and associate costs, interest and profit. And of course the big one – VAT at 13.5% on top of the total costs.
BTW, in one form or another of tax, the government takes 40% of the total, which is why they cheer-led the property boom.
In a nutshell, it is not possible to build and sell at a profit at current market levels.