Irish finance minister announces promissory note deal in national parliament

Minister for Finance, Michael Noonan stood up in the Dail shortly after 4pm today to make a special announcement regarding the renegotiations of the Anglo promissory note arrangement which was set to cost the State €3.1bn in cash in the next two days. The Minister’s statement is here and was delivered with An Taoiseach Enda Kenny sitting alongside. Immediately after the statement was delivered, Fianna Fail’s finance spokesperson Michael McGrath and others sought a debate on the announcement, but the Comhairle disallowed the request but suggested the party whips might agree that time be taken from today’s business. An hour later, and it seems that the whips were unable to agree a slot. So right now, all we have is the Minister’s statement. So what do we know

(1) NAMA will use €3.1bn of its €4.3bn cash reserve to buy an Irish “long-dated” government bond, it will presumably be a 2025 bond.

(2) The Govt will give the €3.1bn it gets from NAMA to give to IBRC (the new name for the Anglo/INBS merged entity)

(3) IBRC will give the €3.1bn to the Central Bank ofIrelandto whom it owes €41bn, and the Central Bank will take the €3.1bn outside, douse it with lighter fluid and set it ablaze, or whatever the electronic equivalent is of destroying money which the Central Bank created to lend to Anglo on the strength of Anglo’s promissory note.

It is hoped that Bank of Ireland which the Government partly controls through its 15% shareholding will buy the bond from NAMA, and exchange the bond with the ECB, but

(1) Bank of Ireland, which is majority controlled by the private sector including the trio of North American investors who bought into the bank last summer, hasn’t agreed to buy the bond.

(2) The ECB hasn’t seemingly agreed to lend Bank of Ireland cash if Bank of Ireland does buy the bond.

In other words, what is happening is the Government is taking €3.1bn from NAMA to pay off the €3.1bn promissory note payment that now falls due. The Government has failed to agree anything it seems with anyone. Save with NAMA which the Government controls despite all the blather about NAMA’s independence. It is unclear how NAMA can buy this bond which is a colossal undertaking for NAMA, an entity that operates under the NAMA Act and the European Commission approval of the NAMA scheme. Did the European Commission foresee NAMA lending billions to the Irish government under the scheme approved in February 2010? Absolutely not, and it is unclear how NAMA can, under the terms of the NAMA Act, buy billions of euro of bonds which may mature in 2025. This “deal” smacks of last minute panicking and it seems nothing has been agreed or conceded by the IMF, ECB or EU.

Expect more on the Promissory Note deal here later.

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Stop press: NAMA publishes new foreclosure list of properties

(The new properties added in February 2012, click to enlarge)

NAMA has today published its now regular monthly list of properties subjected to foreclosure action – the list shows NAMA foreclosed properties at the end of February 2012. The full list is here, the list of new properties added is here, and you will find previous editions of the monthly list which was first launched in July 2011, here. It is hoped to have the list in an spreadsheet format shortly, available here [UPDATE 30th March, 2012. Spreadsheet now available].

You should read the full list of NAMA’s terms for accessing the lists here. But in summary, this is what you’re looking at:

(1) Real estate property subject to loans in NAMA to which receivers have been appointed. The receiver’s website is shown against each property.

(2) This is all the real estate foreclosed sorted by country, and then region.

(3) Not all of the property may be for sale.

(4) Contact the receiver with enquiries or expressions of interest in the first instance. Only pester NAMA if you’re not getting any response from the receiver and make allowances for receivers being busy with queries, particularly after a new release of foreclosed property.

(5) If you think there are mistakes on the list, contact NAMA.

There will be comment and analysis here shortly.

UPDATE: 30th March, 2012. Thanks to a member of the NWL audience, we now have a spreadsheet of the February 2012 foreclosure list available here. These are a few analysis from the spreadsheet which you might find interesting. Firstly an analysis of the 1,169 foreclosure properties by type of property and country.

 

Next an analysis of the receivers.

 

And lastly an analysis of the sales agents.

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Census figures on vacant Irish housing published.

The choreography of information releases following the Irish Census 2011 undertaken in April 2011, continues this morning with a glossy release of selected statistics which includes important new information on vacant Irish housing. Of course vacant housing has risen to prominence after the unfettered building boom of the early 2000s where our annual new housing construction numbers rivalled those of theUK which has 15 times theRepublic ofIreland population. In summary, we overshot and built far more homes than we needed, and today we are still unwinding that legacy by which I mean the available supply of vacant homes nationally outstrips the demand for homes.

This morning’s publication confirms that we still have a significant problem nationally with 289,451 vacant homes of which 59,395 are classified as “holiday homes”. This compares with 49,789 holiday homes recorded in 2006 which is interesting given the colossal economic contraction that occurred between 2008-2011 – you might have thought that holiday homes would have been amongst the first victims of the recession though perhaps the increase is driven by foreign purchases.

The overall level of vacant housing including holiday homes is put at 14.5% – 289,451 as a percentage of 2m total dwellings – which is double that of our neighbours in Northern Ireland. There were 266,331 vacant homes – including holiday homes – in the State at the time of the last Census in 2006, so the number of vacant homes has increased but because the number of homes overall has also increased proportionately more, the vacancy rate has actually dropped by 0.5% from 15% to 14.5%.

So we have 230,056 vacant homes which are not holiday homes. This is out of a total housing stock of 2m homes. Any country will have a “normal” level of vacant homes, be they second homes or vacant homes for sale. The most recent estimate from Ireland’s “National Institute for Regional and Spatial Analysis”  that I have seen, is that we still have an overhang of vacant property of 80-100,000 homes nationally and by “overhang”, this means a vacancy level above the long term normal vacancy level.. And on a national basis, this overhang is likely to be a drag on any house price recovery, and is likely to be a factor in future price declines. It should be said that although the national picture still shows an extraordinary level of vacancies, the picture at a county level (shown below) is less clear. We see thatDublin and surrounding counties have vacancy levels of 5-10% whereas much of Connacht andUlster have vacancy levels of 15-22%. And although the report doesn’t zoom in further to locations within each county, it stands to reason that there will be variations which may mean there is little if any overhang in some specific locations within counties.

But overall, nationally we can still say we have a problem with vacant housing.

UPDATE: 29th March, 2012. There is a helpful note on the approach taken in counting vacant homes, the note is available in the Appendix published by the CSO today to accompany its main release and says “Vacant Dwellings In identifying vacant dwellings, enumerators were instructed to look for signs that the dwelling was not occupied e.g. no furniture, no cars outside, junk mail accumulating, overgrown garden etc., and to find out from neighbours whether it was vacant or not. It was not sufficient to classify a dwelling as vacant after
one or two visits. Similar precautions were also taken before classifying holiday homes. Dwellings under construction and derelict properties are not included in the count of vacant dwellings. In order to be classified as under construction, the dwelling had to be unfit for habitation because the roof,
doors, windows or walls had not yet been built or installed.”

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UK residential property up 0.4% in March 2012 (down 1% on seasonally adjusted basis)

The Nationwide Building Society has this morning published its UK House Price data for March 2012. The Nationwide tends to be the first of the two UK building societies (the other being the Halifax) to produce house price data each month, it is one of the information sources referenced by NAMA’s Long Term Economic Value Regulation and is the source for the UK Residential key market data at the top of this page.

The Nationwide says that the average price of a UK home is now GBP £163,327 (compared with GBP £162,712 in January 2012 and GBP £162,764 at the end of November 2009 – 30th November, 2009 is the Valuation date chosen by NAMA by reference to which it values the Current Market Values of assets underpinning NAMA loans). Prices in the UK are now 12.2% off the peak of GBP £186,044 in October 2007. Interestingly the average house price at the end of January 2012 being GBP £163,327 (or €195,372 at GBP 1 = EUR 1.196) is 23% above the €159,044 implied by applying the CSO February 2012 index to the PTSB/ESRI peak prices in Ireland. The average home in Northern Ireland in Q4, 2011 was worth €163,510, according to the University of Ulster/Bank of Ireland survey.

With the latest release from Nationwide, UK house prices have now risen 0.3% since 30th November, 2009, the date chosen by NAMA pursuant to the section 73 of the NAMA Act by reference to which Current Market Values of assets are valued. The NWL Index is now at 826 (21.1%) – because only an estimated 20% of NAMA property in the UK is residential and only 29% of NAMA’s property overall is in the UK, small changes in UK residential have a negligible impact on the index – meaning that average prices of NAMA property must increase by a weighted average of 21.1% for NAMA to breakeven on a gross basis.

The Nationwide also released its quarterly price series this morning which shows that during the last quarter only the North (of England) and Scotland saw price increases in Q1,2012. Other regions were flat or declined.London declined by 0.7% in the quarter whilst Wales and Northern Ireland were outlying performers with prices declining 3.1% and 2.1% respectively.London and the South East (of England) have performed best over the past 12 months however with 2.3% and 1.8% increases respectively. However given UK inflation is running at 3-4%, all regions are seeing real declines. The outlook is shaky to negative.

 

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