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Archive for October 15th, 2011

This week: the Keane mortgage expert group report

Cover price: €0.00

Real Price : the loss of at least two months in confronting the mortgage arrears crisis. We knew some mortgages were unsustainable, we knew a significant proportion of problem mortgages were with foreign-owned banks, we knew we needed proper personal insolvency legislation; every other developed country in the world has it, the IMF/EU/ECB have demanded we introduce it as part of our bailout agreement, we know we need it. This time has come to, to quote Nike, just do it.

(Graphic above produced by Japlandic.com, with other examples of artwork available here)

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The non-Irish audience might find it difficult to understand the anger felt in this country at the behaviour of our media during the Celtic Tiger boom and subsequent economic collapse. It is common to hear criticism of a media which failed to investigate or criticise or adopt contrary positions during the good times. You will especially hear criticism of the print media for promoting “property porn” which combined reporting on lifestyle, design and architecture with cold finances which suggested the only way was up if you bought such-and-such property, and there was the general message that property was a one-way bet. Our residential property market peaked in 2007 according to the Central Statistics Office, but that didn’t stop the cheerleading of property in our press.

Take a look at this gem from the Johnston Press-owned regional title, the Leinster Express in April 2009. It is describing a new development in a Midland’s town, Tullamore and is quite heavy with its financial advice. “Now is the time to buy as there is real value and it is cheaper to buy than rent when you work out the figures” and “it is a well known fact that major savings can be achieved by purchasing your home now rather than renting and paying someone else’s mortgage” sings the newspaper in what seems like a heavy-sell. According to the CSO, prices of property outsideDublin have fallen 27% between April 2009 and August 2011 and it seems that the pace of declines is increasing. So a €200,000 property bought in April 2009 might be worth €146,000 today after a €54,000 decline in 30 months. Add in stamp duty, interest on a mortgage and future price drops and a new property tax and you can see why people are so angry at the likes of the Leinster Express.

One person who won’t be angry is the man who has claimed squatter’s rights in one of the homes in the development reported by the Leinster Express above. The development is the Church Hill Demesne development close to Tullamore town-centre and today the Irish Independent reports that a court has allowed the squatter, William Tuohy, to remain in the home, a 3-bedroom semi-detached property, which according to the sales blurb for the estate, boasts a marble fireplace and a solid oak kitchen. William appeared before the Tullamore District Court last Wednesday and the judge held that the squatter was entitled to continue living in the property, which reportedly is subject to a loan which is now in NAMA. The squatter was allowed stay after the judge noted that he had improved the property since he moved in, in June, had no intention of committing an offence and has offered to pay rent. The charge of trespass was thrown out.

The decision on Wednesday might have some consequences for NAMA which is shortly to unveil its negative equity mortgage product to help it shift hundreds of its empty properties throughout the country. But as William has shown in Tullamore, you don’t need any convoluted financial product to live in a NAMA house today.

According to data released by the housing minister, Willie Penrose during the week, the development has planning permission for 300 houses – 4 detached, 48 semi-detached and 248 terraced. So far 178 houses have been completed of which 156 are occupied (perhaps in part due to the recommendations of theLeinster Express!) and 22 are vacant. A further 41 houses are at various stages of completion though 14 just have the foundations laid. There has been no start whatsoever on 81 of the houses for which planning permission was approved. There is no work taking place at this point, and the estate is still incomplete lacking the completion of footpaths, sewage system and amenity areas.

With respect to NAMA, since it is NAMA which, according to the Independent, controls a loan for the estate, someone might like to ask the agency why it doesn’t use some part of its the vast cash mountain on which NAMA currently sits, to finish the estate and get the properties on the market, or have discussions with the housing minister about a sale for social housing use – remember there are 98,000 households in the State on the housing list. NAMA has used its cash to redeem €1.25bn of its bonds so far, bonds that cost the agency 1.7% per annum. Might that cash be better used in completing problem estates, thereby generating employment, national assets (housing) and providing existing residents on the estate with footpaths, working sewage systems and amenity areas? Given the low prices paid by NAMA for loans secured by incomplete estates, NAMA might even turn a profit on the venture. So this could be a win-win-win for the agency, the economy and existing residents. Another issue for NAMA, if it is indeed NAMA that controls loans for the estate, is whether the business plan for the site has been approved (or even reviewed), the agency seems to be dragging its heels with this phase of its life-cycle.

Hopefully photographs of the estate will follow shortly and will be posted here as an update.

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