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Archive for July 12th, 2012

It’s not often that NAMA gets a pat on the back, but during the end-of-review Troika press conference this morning, Minister for Finance, Michael Noonan was asked about  NAMA and the recent Comptroller and Auditor General report. Surprisingly, Minister Noonan said that on the two occasions on which he met with the Troika on this visit, NAMA wasn’t mentioned at all. Although this wasn’t stated, the fact that NAMA wasn’t mentioned with the minister nominally responsible for the Agency, probably indicates the Troika doesn’t have concerns for the Agency. Which would be in itself, a pat on NAMA’s back.

But the significant compliment to NAMA was when Minister Noonan said he met with the NAMA Advisory Board last week and he said (from  21:00)

“There were things about NAMA that I didn’t like and there are things about NAMA that I still keep my eye on. But the appointment of advisors to the Minister under the Act was quite helpful. There was a review of NAMA carried out at that stage [presumably when the Board was appointed in March 2012] I met the advisors last week and they said to me “Do you want us to continue because we have been with NAMA all day and we actually think that the difficulties they had have been overcome and that they’re an effective organisation” “Yeah”, I said “I’d like you to continue. I need you at the end of a phone to give me advice, that I can have conversations that are based on the opinion of people who have experience in the property market, rather than personal opinon”

You might recall that there was a review of NAMA by career banker Michael Geoghegan at the end of 2011, in which he called for a more business focussed approach by NAMA as it got stuck into its asset management phase. Following the review, Minister Noonan created a NAMA advisory board which comprises Michael Geoghegan, Denis Rooney and NAMA’s own chairman Frank Daly.

Yes it’s a bit laughable when you imagine Frank Daly meekly asking if Minister Noonan still wanted an advisory board! But presumably the other two, Michael Geoghegan and Denis Rooney would have a more independent opinion on NAMA’s progress.

So a (rare) pat on NAMA’s back.

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This morning Ireland’s Central Statistics Office (CSO) has released its inflation figures for May 2012. The monthly headline Consumer Price Index (CPI) fell by 0.2% compared to April and March 2012, but is up 1.7% year-on-year (which continues a downward trend seen in recent months and the 2%+ that pertained in January 2011). Housing has stopped being the biggest driver of annual inflation, mostly because mortgage costs have been declining – by 7.1% in the past year as ECB rate cuts and greater scrutiny of variable mortgage interest rates take effect. Just a few months ago, mortgage interest was rising by 20% per annum, and as mortgage interest costs account for nearly 6% of the basket which measures inflation, the impact on inflation was substantial.

Energy costs in homes, which account for 5% of the total basket examined by the CSO, have risen by 10.3% in the past 12 months, the same annual increase as pertained in March, April and May. Natural gas continues to rocket with prices up 22.5% annually. This should be a cause for concern.

 

Elsewhere private rents fell by 0.5% in June 2012 – the third monthly decline in 2012 and the first time since before 2010 that there have been three consecutive monthly declines – but over the past year, such rents are up by 2.0% according to the CSO – there is some small rounding in the figures above which show 2.1%.

It seems that in our financial crisis, the big correction in rent took place in 2009 with a 19% maximum decline, compared to a decline of just 1.4% for all of 2010. Since the start of 2011 there has been a 3.5% increase (mostly recorded in February and October 2011 and February 2012).

At the start of January 2012, the Department of Social Protection reduced its rent assistance payments by up to 29% (an average of 13%) and the Department says that some 40% of the rented market in the State is affected by rent assistance payments, which at the end of 2011, was paid to 98,603 households.  The Department’s 40% is derived from information provided to it by the Private Residential Tenancies Board. The Department is projecting it will save €55m in 2012 from its €500m budget for rent assistance, the saving comprising €33m to changes to the minimum contribution and €22m in relation to the new maximum limits. The decline in April, May and June 2012, when three month notices given in January 2012 would have expired may herald the start of the long awaited impact of the reductions in rent assistance announced in January 2012.

Private rents have tended to fall in line with rent allowance even though many landlords will not accept rent allowance tenants. The betting on here is that private rents will come under pressure in the short term. Property commentators including those in NAMA have pointed to a buoyant rental market as one of the bright spots in an otherwise dismal property market, but that buoyancy may deflate in coming months as the artificial supports of State-aided rent assistance dissipates.

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NAMA isn’t saying, but according to RTE, the owner of the 63-house Glendale Estate in Tullow in Carlow was Glendale Estates Limited. And according to Iris Oifigiuil, the receiver, Jim Hamilton of BDO Ireland, was appointed to Glendale Estates Limited was at the behest of AIB in February 2011. AIB is one of the five NAMA participating institutions and the property in Tullow is a development property if ever there was one, which would place it in NAMA’s remit. Not only that, but the owners of Glendale include Anton Hunt and Paul Collins,  and NAMA recently had receivers appointed to companies owned by these individuals eg Camion Developments Limited, Neidin Developments Limited.

On the other hand, the property is not apparently listed in the latest NAMA enforcement list, but as we have seen in the past, that list is riddled with errors.

The 63-house estate would have been worth €12.6m-plus at the peak if each of the 63 houses were fully completed and sold for €200,000 apiece. As it happens, the homes need kitchens, but will apparently still fetch €100,000 today when completed. There is also planning permission for an additional 58 homes on the 14-acre property.
What did the property sell for yesterday? €640,000 in an auction by DNG at the Shelbourne hotel in Dublin – the sales listing is still available from the DNG website. The guide price was €150,000 but six bidders are said to have driven the price to €640,000, and about 20 punters/gawkers are said to have attended the single Lot auction.

Who bought the property? This is where it becomes more interesting if this was indeed a NAMA sale. The buyer is reported to be “in trust on behalf of an anonymous buyer”. In other words, it could be anyone including a “defaulting debtor” as proscribed by the NAMA Act.

NAMA was asked if this was one of their sales, and more generally, what controls it has in place to prevent property being bought at auction by defaulting developers.

There has been no response from NAMA.

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It looks as if it will still be a few months before we get the much-anticipated new residential property sales register in Ireland. The body responsible for the new register , Property Services Regulatory Authority is not answering questions on the precise date for the introduction of the register – we’ll get it as soon as we get it, seems to be the attitude of the State agency whose chairperson is Geraldine Clarke. Separately, the NAMA chairman Frank Daly two weeks ago called for the introduction of a register of sales prices for commercial property. Speaking at the prestigious RICS meeting in Dublin, the NAMA chairman said “We favour extending this proposal to commercial property sales transactions because we believe that transparency would enhance the efficiency of that market also”

So NAMA, in which we have invested €30bn, calls for a commercial property sales register. And what does the Minister responsible for NAMA feel about it? Minister for Finance Michael Noonan was asked about it in the Dail yesterday by the Sinn Fein finance spokesperson Pearse Doherty and the response might be characterized as an unconvincing shoulder shrug. The full exchange is here.

“Deputy Pearse Doherty: further to calls by the National Assets Management Agency chairman (details supplied) for the introduction of a public register of commercial property sales prices, if he will set out the consideration he has given to such a register and confirm if there are any plans for such a register and if he will further set out the detail of any such plans..

Minister for Finance Michael Noonan : I understand that a Commercial Leases Database and a database of residential property sales prices is currently being considered by the newly-established Property Services Regulatory Authority, which does not fall under the auspices of the Department of Finance.

I understand the primary purpose of the Commercial Leases Database will be to ensure that accurate information will be available to assist in ensuring that rent review assessments are based upon true comparisons of rent levels and that the availability of such information should favourably impact on the conduct of rent reviews and also on the operation of the letting market itself.”

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