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Minister Noonan delivers weird property speech to weird property organisation

June 28, 2012 by namawinelake

When the NAMA chairman Frank Daly made a speech last year to the Licensed Vintners Association, there were a few raised eyebrows at why NAMA would be speaking to a small group of pub-owners. This morning, Minister for Finance Michael Noonan was present at an occasion organised by an equally small organisation, Property Industry Ireland, in which Minister Noonan held forth on the state of, and prospects for, the Irish property industry.

The speech is here, there’s nothing really new in it, but there will be a few snippets of interest to the audience on here.

(1) It seems that NAMA is providing up to 75% of purchase prices through its vendor pricing scheme. The Minister said two weeks ago that it was 70%, but that was at odds with NAMA’s own statements on the scheme.

(2) “Banks have stated [presumably to Minister Noonan] that they have significantly increased the number of mortgage approvals given, however, mortgage drawdown remains low. They [the banks] cited two factors for this: In the country – uncertainty about house prices, and inDublin– house prices moving above the expected sale price.” That’s a strange turn of phrase – “house prices moving above the expected sale price” and presumably means that buyers aren’t buying property they think is too expensive.

(3) Under the heading “[Measures to stimulate property market] – [Initiatives]”, Minister Noonan says his “Department is taking a lead role in returning the property market to normal” though little detail is provided

(4) There is an awkwardly worded call for private sector involvement in new construction and development – “Private sector investment is now needed to complement these initiatives by the State and NAMA initiatives, including for instance vendor financing, which can help leverage increased private sector appetite for property-related investment in Ireland.”

(5) Minister Noonan claims that property – presumably both residential and commercial – is competitively priced – “due to the property crisis, property is currently extremely competitive in international terms.” The National Competitiveness Council, in a report published earlier this year, would seem to disagree…

(6) The Minister points out that there are varying vacancy levels across the State, which is true enough, but his conclusion might strike some as odd – “based on these figures, care is needed to ensure that there is a sufficient supply of houses in areas of growing demand such as Dublin, as the last thing we need is a surge in house prices.” It’s as if he is calling for speculative residential development inDublin.

As for Property Industry Ireland, it is not exactly clear what the raison d’etre of this organisation is; it appears similar to the Construction Industry Federation (CIF). The only news item on PII’s website is an article in the Irish Times by Bill Nowlan which begins “Ireland’s economy depends largely on property” Minister Noonan described the group this morning as a “think tank”, though there doesn’t seem to have been much publishing “thinking”since the group was formed a year ago.

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Posted in Banks, House Price Database, Irish economy, Irish Property, NAMA, Politics, vacant property | 7 Comments

7 Responses

  1. on June 28, 2012 at 3:07 pm Ronan Lyons (@ronanlyons)

    In relation to: “house prices moving above the expected sale price” and why that might affect mortgages, here is how I read it:
    House A, a family home in suburban Dublin, is listed for sale at say €350,000, down 60% from its price at the peak. Couple like house, say to bank “Can we have a mortgage of €320,000?”, bank says yes, couple make first bid of €325,000, thinking roughly 10% below the ask is about where the market is… only for another person to bid and possibly others.

    Cut to the end of the process, house sells for €375,000 and our couple do not draw down their mortgage.

    This is not uncommon in Dublin at the moment.


  2. on June 28, 2012 at 3:11 pm Rob S

    Hey NWL,

    Also a little unsure of this new organisation.

    You probably saw this in the IT today but another article from PII Director Finola McDonnell.

    Not much more illuminating.

    http://www.irishtimes.com/newspaper/opinion/2012/0628/1224318886589.html


  3. on June 28, 2012 at 3:14 pm Brian Flanagan

    For insights into Property Industry Ireland’s thinking, see its opinion piece in today’s Irish Times along with a load of cynical comments:
    http://www.irishtimes.com/newspaper/opinion/2012/0628/1224318886589.html


    • on June 28, 2012 at 4:02 pm Gerhard Dengler

      Thanks for that link, Brian. It makes for very interesting reading, especially the comments section.


    • on June 28, 2012 at 9:18 pm bjg

      This one might be interesting too: http://www.irishtimes.com/newspaper/finance/2012/0330/1224314097237.html

      bjg


  4. on June 28, 2012 at 3:40 pm sf ca writer

    Off topic? Education note: In English education around the world (though probably not ireland) at high school level,the emphasis is to shift from novel and book length work to speeches. No more Evelyn Waugh, in future it will be speeches of luminaries like Noonan. Very dramtic shift of emphasis I would say. I think it could be a good move.Not sure they’ll look to Noonans speeches though…or Bertie’s……..


  5. on June 29, 2012 at 2:03 am John Gallaher

    Not the only contradiction,link above (1) Minister in the Dail.
    “…….NAMA may offer up to 70% of the purchase price for a period of 5 years at a typical interest margin of 3% over cost of funds.”

    So which is it 5 or 7 years,that’s the problem when you make it up as you go along.They can’t even get on same page,so far there is confusion over the amount of leverage and length of term,just about the two most important details!

    “Even better, Paul McDowell of Knight Frank, who is handling the sale, says the five-year Nama funding could potentially be increased to a seven-year term.”
    http://www.irishtimes.com/newspaper/commercialproperty/2012/0627/1224318800562.html

    Really Paul,you have authority to extend NAMA’s stated loan terms by two years !



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