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Archive for July 27th, 2011

Willie Penrose, the Minister of State, Department of Environment, Community & Local Government with responsibility for Housing & Planning, has told 98FM radio in Dublin that Cluid Housing Association has bought 58 apartments in the Beacon South Quarter in Sandyford (see map above) from NAMA. The Department is involved with the transaction on account of its control over the financing of the deal (see below)

Of the 58 apartments, 34 will be rented to people on the local authority list with reduced rents. The remaining 24 apartments will be privately rented. The purchase price has not yet been announced but queries have been submitted to the various parties to the transaction, and this post may be updated later.

The Beacon South Quarter was developed by NAMA Top 20 developers, Paddy Shovlin and the Fitzpatrick brothers, Patrick and Tony. The website of the shopping centre which is part of the development describes Beacon South Quarter as having been “developed by Landmark Developments as a new high end retail, residential, office and hotel quarter for South Dublin. With over 25,000 square metres of upmarket retail outlets, 1,100 luxurious apartments and a vibrant cultural centre” Last October 2010, having absorbed the loans secured by the Beacon South development, NAMA obtained an order against the developers in Dublin’s High Court (there was no judgment, NAMA merely secured an order) and a receiver was appointed by NAMA to the properties. It is understood that the sale announced today was concluded on behalf of NAMA by the receiver, Simon Coyle of Mazars (pictured here).

According to the housing association, and in respect of the funding of the purchase “a loan of approximately 75 per cent of the purchase price has been approved in principle by the Housing Finance Agency (HFA), the first such transaction by the HFA. The remaining 25 per cent is being funded from Clúid resources and the Capital Advance Leasing Facility (CALF), a new facility that has been created to support the acquisition or development of new homes using funding from financial institutions.” CALF is indeed a new facility and seems only to have been announced by the Department of Environment, Community and Local Government on 11th July, 2011 – the facility which combines State support and finance from “financial institutions”. Queries have been submitted to the Department for further information on the facility, and this entry may be updated with any response.

So the key question, how much were the properties sold for and how will the NAMA sale price compare with existing prices? As regards existing prices, there is no information on settled prices publicly available; and just to confirm, there were no sales of Beacon South property in the two recent Allsop/Space auctions. So we are left with asking prices, and a quick browse through DAFT.ie returns seven properties in the Beacon South Quarter and the results indicate reasonably high spec apartments for sale with asking prices of about €250-300 per square foot. If average apartment sizes are 800 sq feet, the NAMA transaction might be expected to be worth €14m. NAMA has recently been indicating prices achieved on individual sales (eg Montevetro and the Jack Yeats painting) – so hopefully we will soon get the sales price information for this transaction. It should after all indicate NAMA’s view of the market.

UPDATE (1): 27th July, 2011. There is a press statement from Minister Penrose (pictured here apparently handing over car keys to the Cluid housing association). There is no additional commercial information available in the release which focusses on the social benefit of the transaction. It seems that there won’t be further information forthcoming from either NAMA or the receivers either, though efforts to reveal the purchase price will continue.

UPDATE (2): 27th July, 2011. There appears to be an enlarged press release from the Cluid Housing Association in which there is some financial information. The total purchase price is €10.3m, or an average of €177,500 per apartment (elsewhere it is confirmed there are a mix of one- and two-bedroom flats). The flats presently for sale in the Beacon South Quarter on DAFT.ie are 2-4 bedroom, with minium 800 sq ft. There is no one-bedroom flat for sale. So, it’s difficult to say how the purchase price announced today compares with existing asking prices.

UPDATE: 29th July, 2011. The Cluid Housing Association has confirmed that the apartments purchased from NAMA comprised  12 x 1 bed units, 44 x 2 bed units and 2 x 3-bed units.

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This morning has seen the publication of the fourth CSO residential property price indices forIreland. The inaugural series was published by the CSO on 13th May 2011 and covered the period from January 2005 to March 2011. This morning’s release covers the month of June 2011. Here’s the summary showing the index at its peak, November 2009 (the NAMA valuation date), June 2010 (12 months ago), December 2010 (end of year, start of this year) and June 2011.

Now that the Permanent TSB/ESRI has abandoned its quarterly house price index, the CSO isIreland’s premier index for mortgage-based transactions. Mortgage transactions at eight financial institutions are analysed : Allied Irish Banks, Bank of Ireland, ICS Building Society (part of the Bank ofIrelandgroup), the Educational Building Society, Permanent TSB, Belgian-owned KBC, Danish-owned National Irish Bank and Irish Nationwide Building Society. The index is hedonic in the sense it firstly groups transactions on a like-for-like basis (location, property type, floor area, number of bedrooms, new or old and first

time buyer or not) and then assigns weightings to each group dependent on their value to the total value of all transactions. The index is an average of three-month rolling transactions.

As for the key questions:

How much does property now cost in Ireland? The CSO deliberately don’t produce average prices. The former PTSB/ESRI index did, and claimed the average peak price nationally in February 2007 was €313,998, in Dublin in April 2007 was €431,016 and outside Dublin in January 2007 was €267,987. If, and it is a big “if”, you were to take PTSB/ESRI figures as sound and comparable to the CSO series, then the average today

Nationally, would be €182,142

Dublin, would be €221,436

Outside Dublin, would be €163,955

I don’t think the CSO would be happy with this approach but it seems to me that the PTSB/ESRI series as represented by its historical indices, closely correlates with performance of the CSO indices.

What’s surprising about the latest release? After recording an increase of 0.3% in May 2011, houses inDublin declined by 2.4% in the month of June 2011 alone. OutsideDublin, property fell by a more modest 1.9-2% and the expectation is that the country has some way to decline, to bring it in line with cumulative declines inDublin.

Are prices still falling? Yes and the pace of decline shows no signs of easing. A 2.1% decline nationally in the month of June 2011 and an annual decline of 12.9% are both worse than last month.

How far off the peak are we? Nationally 42%. Interestingly, as revealed here two months ago,Northern Ireland is some 44% from peak. Are forbearance by mortgage lenders, a draconian bankruptcy regime and NAMA’s (in)actions distorting the market? Or are cash transactions which are not captured by the CSO index so significant today that if they were captured, the decline in the Republic would be even greater?

How much further will prices drop? Indeed, will prices continue to drop? Who knows, I would say the general consensus is that prices will continue to drop. This is what I believe to be a comprehensive list of forecasts and projections for Irish residential property, drop me a line if you think there are any omissions.

What does this morning’s news mean for NAMA? The CSO index is used to calculate the NWL Index shown at the top of this page which aims to provide a composite reflection of price movements in NAMA’s key markets since 30th November 2009, the NAMA valuation date. Residential prices are now down 19.4% from November, 2009.  The latest results from the CSO bring the index to 856 (16.9%) meaning that NAMA will need see a blended average increase of 16.9% in its various property markets to break even at a gross profit level.

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