Archive for July 4th, 2011

One of Ireland’s most senior judges today delivered a rebuke to NAMA for apparent delays in dealing with a matter before the courts. The remarks are reported by Mary Carolan in the Irish Times. It is not clear when the remarks were made as the case quoted was apparently not before the courts today according the Court Service legal diary. The redoubtable Mr Justice Peter Kelly is reported to have said that a “number” of cases that have come before the Commercial Court have been delayed as a result of delays of “an inordinate period” at NAMA.

The case reported by the Irish Times concerns a €40m claim lodged in February 2011 by Neil Durkan’s, Durkan New Homes Limited against Phil Hogan’s Department of the Environment . Durkan had apparently agreed to build 215 social housing homes for the Department in return for the Garda station on Harcourt Terrace in central Dublin. Durkan claim it completed its side of the bargain but the Minister welched on the deal because of delays with occupying a new Garda station at Kevin Street. It seems likely from the reporting that NAMA is involved in Durkan’s loans to build the social housing and was being consulted over a settlement offer by the Minister. This in itself is amusing : a NAMA-backed developer suing a government department since the government practically owns NAMA.

The upshot of it all is that Minister Hogan made a settlement offer. The offer had to be agreed by NAMA, presumably because the agency had acquired the loans used to build the social housing. It is not clear when the proposal was sent to NAMA but it is claimed that on 30th May 2011, it had been with NAMA for several weeks and on that date, 30th May, NAMA was asked to make a decision, presumably by Durkan. And a month later, the agency has still not made a decision or communicated that decision to either Durkan or the Minister. The Irish Times report says that last week NAMA responded to Durkan to say the matter was being considered “higher up” in NAMA.

Both the Minister and Durkan are reported to have written to NAMA asking for a decision. It is not reported if there has been any response by NAMA. As a result of NAMA’s apparent delays in responding, the case is to proceed with discovery of documents which will add to costs in the case, which it is suggested will ultimately be borne by the taxpayer.

The above is quite damaging to NAMA. The agency is by all accounts working very hard at a senior level to deal with developer business plans and everything that goes with managing a portfolio of €73bn of loans. The NAMA CEO is reportedly working 75 hours a week and reports reaching here suggest senior personnel at NAMA are working 12 hour days. Other reports suggest a degree of management dysfunction at a lower level in the organisation. But there is no suggestion that NAMA staff are sitting around all day playing solitaire on their computers. So it is understandable that there will be delays at NAMA in processing requests. But for NAMA not to provide a holding letter, perhaps providing a timescale in which a decision might be made or indicating the points at issue or resources needed or tasks to be undertaken to reach a decision, seems inexcusable and indeed disrespectful to the Court. That the taxpayer will ultimately pick up additional costs (because either the Minister will pay them or Durkan will, and Durkan may deduct them from loans outstanding) is also troubling.

NAMA presently has 140 staff and recently stated that it is recruiting an additional 60 to bring the overall complement to 200. NAMA is directly managing the top 180 developers owing €62bn of loans at nominal value. Capita and staff at banks are managing the remaining 670 developers who owe €10bn. It has long been an issue on here that NAMA is just not sufficiently resourced to handle this quantum of loans, particularly in the early years as procedures are established and business plans agreed. FG in Opposition said they would farm out NAMA’s operations to 3-4 asset management companies, and indeed then-Opposition leader Enda Kenny asked on 23rd March 2010 in the Oireachtas how NAMA could function with so few staff when other asset management companies with similar value assets employed 1,000s. Enda might be getting his answer if this delay criticised by Judge Kelly is representative. And Judge Kelly stated that there were a “number” of other cases where NAMA’s delays were “sterilising” the work of the Commercial Court. NAMA can’t afford many such critics or criticisms.

UPDATE: 12th July 2011. Ireland’s Evening Herald reports that NAMA has responded to last week’s criticism in the above case and has “responded “very quickly” to the proposals and a meeting was also held with the agency”. Apparently NAMA’s late engagement in the matter has not resulted in a settlement and the case has been set down for a hearing in 2012, but at least the agency is being seen to engage with a matter before the courts.


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As we now have the usual quarterly troika of Irish residential property price surveys from DAFT.ie, Myhome.ie and Sherry FitzGerald, this entry is a roundup to see what the surveys are telling us. The Myhome.ie survey is not available from its website yet (UPDATE: 4th July, 2011. Now available here), the Irish Times which owns the website reports on some of the results here, so apologies Myhome.ie’s cells in this spreadsheet are underpopulated – blame meeja management, but I don’t think you’re missing much and certainly not enough to wait for the full Myhome.ie report to be published. Here’s the overview.

(1)  At regional level, prices dropped 3-6% in quarter two of 2011 and 12-17% in the last year.

(2) At regional level, prices are 40-47% off peak according to Myhome/DAFT and 55-60% off peak according to Sherry FitzGerald.

(3) At regioanl level, price drops accelerated during the quarter. Why? My guess is the Allsop/Space auction on 15th April 2011 where openly tendered prices appeared to be some 60% off peak.

(4) DAFT.ie provide statistics at county, city level. The largest decline in the quarter was in Offaly (11.7%), in the past year Longford (21.9%) and from peak Dublin City Centre (54.6%). The smallest decline in the quarter was Kerry (1.6%), in the past year Leitrim (11.2%) and from peak Limerick City (34.1%). These figures tell me we have a dysfunctional property market as far as asking prices go.

In terms of how the different sources compile their statistics this is what each has to say.

(1) DAFT.ie : Its index is based on properties advertised on Daft.ie for a given period. The national average is built up from Census weights per county, in effect ensuring the average reflects where people live, not any variations from that that may exist in Daft’s market share. The regressions used are hedonic price regressions, accounting for all available and measurable attributes of properties and only coefficients with a very high degree of statistical significance (p < 0.001) are used. The average monthly sample size for sales during 2009 was over 10,000. Indices are based on standard methods, holding the mix of characteristics constant, with the  annual average of 2007 used as the base. A working paper on the methodologies employed in both rental and sales markets will be published on the Daft.ie website soon. Stock and flow statistics are calculated using consistent series for the period covered.

(2) Myhome.ie : Its index is based on actual asking prices of properties advertised on MyHome.ie with comparisons by quarter over the last six years. This represents the majority of properties for sale inIreland from lead­ing estate agents nationwide.  The series in this report have been produced using a combination of statistical techniques. Our data is collected from quarterly snapshots of active, available properties on MyHome.ie. Our main National andDublin indices have been constructed with a widely-used regression technique which adjusts for change in the mixture of properties for sale in each quarter. Since the supply of property in each quarter has a different combination of types, sizes and locations, the real trends in property prices are easily obscured. Our method is designed to reflect price change independent of this variation in mix.

(3) Sherry FitzGerald : Its index is based on the analysis of a basket of properties in its locations nationwide.  Commencing in 1996 in theDublin market, it was extended nationwide in 1999. Each basket of properties was chosen based on a weighted profile of properties in each location.  The basket extends to over 1,500 properties, which are re-valued on a monthly basis forDublin properties and a quarterly basis for nationwide properties with results produced quarterly. The basket is held constant and re-valued based on market evidence.  Sherry FitzGerald through its franchise network is represented in every major city, town and county inIreland.

So two of the above are asking price indices and the Sherry FitzGerald is a valuation assessment index (akin to how SCS/IPD and JLL compile the commercial property indices as far as I can see)

Note Ireland has two actual sale price series, one from the Department of the Environment Housing and Local Government which is an atrociously crude average of mortgage transactions and is issued six months after the event; the other is new and is from the CSO and is issued monthly and is an hedonic index but only based on mortgages at eight Irish lending institutions. NAMA has recently said that prices were down an average of 50% from peak in November 2009, 16 months ago. There is no word on the immediate intentions of the new government on the House Price Database – the legislation is drafted in the Property Services (Regulation) Bill amendment and Fine Gael indicated it would pick this legislation up and progress it. Dail committees were only established in June 2011 but there has not been any progress at all.

In terms of outlook, who knows? These are the latest predictions/projects captured on here which I believe to be a comprehensive reflection of reported predictions and projections.

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