Archive for July 2nd, 2012

With at least 13 NAMA developers*  already declared bankrupt in the UK, it is perhaps a good point to ask  if such bankruptcies are undermining  NAMA’s work. And last week, the Fianna Fail finance spokesperson Michael McGrath did exactly that when he asked Minister for Finance, Michael Noonan about the matter. The full exchange is here (with emphasis added)

Deputy Michael McGrath: his views on whether the work of the National Assets Management Agency is being undermined by developers attempting to avail of bankruptcy in the UK; and if he will make a statement on the matter. [31432/12]

Minister for Finance, Michael Noonan:  I am advised by NAMA that for a debtor to avail of bankruptcy in any given jurisdiction he/she must first of all establish that jurisdiction as his/her centre of main interest (COMI). The establishment of COMI is a matter for the relevant authorities in the jurisdiction in which bankruptcy is sought. NAMA further advises that in its position as a secured creditor it is generally neutral on the locus of bankruptcy proceedings as long as location does not prejudice the Agency’s potential recoveries from the bankruptee.

I am also advised by NAMA that the comparatively shorter duration of bankruptcy in the UK is not a consideration for NAMA as the bankrupt’s assets remain in the control of the bankruptcy trustee long after the bankrupt may have been discharged from bankruptcy and any failure to make full disclosure may result in the period of bankruptcy being extended, in the case of the UK beyond the initial one year period. NAMA advises that it is currently challenging the release from bankruptcy in Northern Ireland of one debtor, due to non-cooperation with the bankruptcy trustee.

NAMA advises that its position on the locus of bankruptcy proceedings is partially based on positive on-going engagement with several trustees in bankruptcy of NAMA debtors who have been adjudged bankrupt in the UK. The Agency points out that the bankruptcy regime in the UK is well established, sophisticated and that trustees in bankruptcy under the UK system possess extensive powers to compel production of legal and banking information, on a cross-border basis, from the bankrupt. These powers have been used in bankruptcy cases involving NAMA debtors to uncover significant undeclared assets.

The position of unsecured creditors is fundamentally different. Unsecured creditors, whose claims are subordinate to that of secured creditors, may seek to bolster their position by pursuing bankruptcy proceedings against a debtor. It is worth noting that bankruptcy proceedings are rarely brought by secured creditors and usually in cases of non or lack of full disclosure.

The response above might come as a surprise to some developers actively considering changing their Centre Of Main Interest from the Republic of Ireland to the UK with the intention of ultimately seeking bankruptcy; they now learn that NAMA is “neutral” on the matter as long as it doesn’t prejudice NAMA’s potential recoveries.  Now unless the difference between the 12 month bankruptcy period in the UK and the 3-12 years in the Republic of Ireland, “prejudices potential recoveries” then NAMA is seemingly unconcerned. In fact NAMA is apparently satisfied that the expertise of bankruptcy trustees has uncovered previously undeclared assets.

The Northern Ireland developer whose discharge from bankruptcy is being challenged by NAMA, is not identified by Minister Noonan above, but with only six apparent candidates – Alastair Jackson, Fergal McAlinden, Peter McDaid, Mervyn McAlister, Peter Dolan, Sam Thompson  – it can’t be that difficult to identify the lucky developer. We know that NAMA is continuing to challenge the discharge from bankruptcy of Cork developer, John Fleming and is seeking an attachment on earnings for two more years, and it is understood there is an issue about John’s pension also, but John’s bankruptcy was in England, so this Northern Ireland challenge relates to a different developer.

*the 13 NAMA developer s already declared bankrupt in the UK – John Fleming,  Ray Grehan, Danny Grahan, Tom McFeely, Patrick Fitzpatrick, Bernard Doyle, Paddy Shovlin , Northern Irish developers Alastair Jackson, Fergal McAlinden, Peter McDaid, Mervyn McAlister, Peter Dolan, Sam Thompson


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With the introduction of the House Price Database which should ensure all transactions – cash and mortgage – are publicly available, now kicked back to the end of 2012 it will be some months yet before we can finally wave “Goodbye and Good Luck” to asking price and estate agent valuation indices in Ireland. Personally I will be happy to see the back of them, or at least their supplanting by the House Price Database, because of the mish-mash of presentations which makes the assembly of the table below far more difficult than it should be. Sherry FitzGerald produce analysis of real – excluding inflation – and nominal prices and it isn’t always clear which is which – the others look at nominal only. DAFT produce an analysis of Dublin prices by Dublin region, but don’t seemingly publish an overall Dublin figure and it has to be requested every quarter. Myhome make their report available on their website some time after the results are released to the media. You’d almost think they wanted to obstruct analysis and comparison of their results, but that’s probably being overly sensitive.

As always, the accompanying narrative is interesting and, in particular, this quarter’s DAFT report coincides with a major piece of work to analyse price trends over the past five years, but it is still faintly ridiculous to have so much analysis of what are asking prices or valuation estimates. DAFT says prices in Longford fell by 13% during Q2, 2012 (after a rise of 10% in Q1,2012) – no doubt, that’s what asking price data is saying, but does anyone believe it?

What is noteworthy with this quarter’s reporting, is the effort to fashion a message that Dublin is stabilizing or indeed increasing whilst most of the country generally is still in decline. But if you examine the quarterly results, only Sherry FitzGerald shows an increase and that is just 0.1% – both DAFT and Myhome show declines for Dublin of 1.2-4.7%. DAFT shows all regions in Dublin declining over the quarter except Dublin city centre where prices were flat at 0.0% change. According to Myhome, there was a quarterly decline of 4.7% which would equate to a decline of 20% annualised and this is far from stable! Property markets can of course be segmented by area, even down to street or part-of-street level, and there can be a difference in type of property, apartment and house for example, or construction, new versus second hand. And prices within segments can differ from the market generally. The narrative from all sources is that transactions are taking less time to complete – though of course we still don’t have final prices generally – and that stock is declining.

We now have the three quarterly surveys from DAFT.ie, Myhome.ie and Sherry FitzGerald. There is a fourth quarterly Irish residential report from Lisney but its publication is out of sync with the others though it usually shows the same information.  Here’s the overview.

(1)  At a national level, prices dropped 1-3% in quarter two of 2012 and 12-15% in the last year and are now 49-57% down from peak.

(2) In Dublin, prices fell 1-5% according to DAFT and Myhome, but according to Sherry FitzGerald were up 0.1% in the quarter. Annually Dublin prices are down 10-18% and are down 56-60% from peak.

(3) DAFT.ie and Myhome.ie both provide 26-county-by-county results.

(3a) DAFT.ie says that for Q1, 2012, Longford recorded the biggest quarterly decline with prices dropping 13%. On the other hand, prices in Carlow rose by 9.8% in the quarter.

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. The change to the national average price 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.

(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. Their data is collected from quarterly snapshots of active, available properties on MyHome.ie. Their 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. Their 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 the Dublin 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 for Dublin 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 in Ireland.

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

In addition to the above surveys, 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 from the CSO and is issued monthly and is an hedonic index but only based on mortgages at eight Irish lending institutions. The Bill giving legislative effect to House Price Database  – called the Property Services (Regulation) Bill – has now been approved and should see a Database available from late 2012 and it will have historical prices from 2010.

In terms of outlook for property prices, who knows? This blog’s predictions for 2012 are here. These are the latest predictions/projects captured on here which I believe to be a comprehensive reflection of reported predictions and projections, though if you feel there is any omission, please contact me so that I can update the table; house price projections in Ireland can be a vexed subject!


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Brian Rowntree, one of the two Northern Ireland appointees to NAMA’s Northern Ireland Advisory Council, has, according to the BBC, this morning resigned his position as chairman of the Northern Ireland Housing Executive after a contracts scandal was uncovered, in which there were allegations of a contractor overcharging for substandard maintenance – a full report on the matter is due this week and the BBC reports it contains “alarming findings” and it is being suggested the resignation coincides with the publication of the findings of the report.

Alongside Frank Cushnahan, Brian was just two weeks ago re-appointed for a further two-year period on the NAMA council with the assent of Northern Ireland’s Finance and Personnel minister, Sammy Wilson.

NAMA has no comment at present on this morning’s development, and it remains unclear if Brian’s position on the NAMA council will be affected.

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