Archive for December 28th, 2012

This morning has seen the publication of the Central Statistics Office (CSO) residential property price indices for Ireland for November 2012. Here’s the summary showing the indices

  • at their peak (various months in 2007 depending on type of property and location)
  • the NAMA valuation date (November 2009)
  • 12 months ago (November 2011)
  • the start of this year (end December 2011)
  • last month (October 2012)
  • this month (November 2012)


The CSO’s indices are Ireland’s premier indices for mortgage-based residential property transactions. The CSO analyses mortgage transactions at nine financial institutions : Ulster Bank, Allied Irish Banks, Bank of Ireland, ICS Building Society (part of the Bank of Ireland group), the Educational Building Society, Permanent TSB, Belgian-owned KBC, Danish-owned National Irish Bank and Irish Nationwide Building Society. The indices are hedonic in the sense it firstly groups transactions on a like-for-like basis (location, property type, floor area, number of bedrooms, new or old and first-time buyer or not) and then assigns weightings to each group dependent on their value to the total value of all transactions. The indices are averages of three-month rolling transactions.

Cash transactions: With the launch of the property price register at the end of September 2012, the continuing relevance of a mortgage-only index from the CSO may be short-lived. Already DAFT.ie has begun the work to produce hedonic indices based on all the transactions made available by the Property Services Regulatory Authority, transactions dating back to January 2010. I would not expect the CSO index to be the foremost residential property index in the State by the start of 2013.

As for the key questions:

How much does property now cost in Ireland? The CSO deliberately doesn’t produce average prices. The former PTSB/ESRI index did, and claimed the average price of a property nationally hit the peak in February 2007 at €313,998, in Dublin in April 2007 at €431,016 and outside Dublin in January 2007 at €267,987. If, and it is a big “if”, you were to take PTSB/ESRI prices as sound and comparable to prices captured by the CSO series, then these would be the average prices today:

Nationally, €160,017 (last month €157,360, peak €313,998)

In Dublin, €192,603 (last month €187,789, peak €431,016)

Outside Dublin, €144,401 (last month €142,733, peak €267,987)

I don’t think the CSO would be happy with this approach but it seems to me that the PTSB/ESRI series, as represented by its historical indices, closely correlates with the performance of the CSO indices.

What’s surprising about the latest release? AThe decline in October 2012 agter three months of price rises appears to have been a blip and the 1.1% increase is the largest monthly increase since September 2006 when a 1.3% increase was recorded. Apartments nationally continued their decline with a stonking 3% month-on-month decline taking apartment prices nationally down 63.1% from peak in February 2007. Dublin prices were up a strong 2.4% in the month though that masked positive performance from houses and a decline in apartment prices.

Are prices still falling? No, and prices rose in November 2012 at the largest month-on-month rate since . This followed a 0.6% decline nationally in October 2012 after increases of 0.9% in September 2012 following a 0.5% increase in August 2012 and 0.2% in July and a decline of 1.1% in June, an increase of 0.2% in  May following a decline of 1.1% in April 2012, it was flat in March 2012 which followed a 2.2% decline in February 2012, 1.9% monthly decline in January 2012, 1.7% decline in December 2011, 1.5% decline in November  2011, 2.2% decline in October 2011, 1.5% decline in September 2011 and 1.6% decline in August 2011.

How far off the peak are we? Nationally 49.3% (50.1% in real terms as we have had inflation of just 1.5% between February 2007 and November  2012). Interestingly, as revealed here, Northern Ireland is some 55% from peak in nominal terms and 62% off peak in real terms. Are forbearance measures by mortgage lenders, a draconian bankruptcy regime and NAMA’s (in)actions distorting the market? Or are cash transactions which are not captured by the CSO index so significant today that if they were captured, the decline in the Republic would be even greater?

How much further will prices drop? Indeed, will prices continue to drop at all? Who knows, I would say the general consensus is that prices will continue to drop. This is what I believe to be a comprehensive list of forecasts and projections for Irish residential property [house price projections in Ireland are contentious for obvious reasons and the following is understood to be a comprehensive list of projections but please drop me a line if you think there are any omissions].

What does this morning’s news mean for NAMA? The CSO index is used to calculate the NWL Index shown at the top of this page which aims to provide a composite reflection of price movements in NAMA’s key markets since 30th November 2009, the NAMA valuation date. Residential prices in Ireland are now down 29.6% from November, 2009.  The latest results from the CSO bring the index to 791 (26.5%) meaning that NAMA will need see a blended average increase of 26.5% in its various property markets to break even at a gross profit level.

The CSO index is a monthly residential property price index calculated from mortgage-based transactions. There are four other residential price surveys, based on advertised asking prices or agent valuations (see below, details here). In addition Phil Hogan’s Department of the Environment, Community and Local Government produces an index based on mortgage transactions, six months after the period end to which the transactions relate, and which is not hedonically analysed – it is next to useless, and as some might say is a reflection of Minister Hogan, the Department will continue to produce these indices at a “marginal cost”.


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2012 saw NAMA move decidedly into its asset management role having largely concluded its asset acquisition phase. It was a year of foreclosures, disposals, litigation and for the first time, scandal with politicians continuing to encroach on the independent Agency’s activities. There were some decent financial results, but against a backdrop of still-declining property values in NAMA’s main market, life remains challenging for NAMA and the jury is still out on its likely ultimate performance.

This is a month-by-month account of NAMA in 2012 with January-April inclusive today, and the remaining two parts to be published tomorrow and Sunday.

January 2012 – On 1st January, we learned that NAMA Top 10 developer Michael McNamara was carving out a new business in Nigeria with the construction of a new €120m university.  Receivers were later appointed at the behest of NAMA to his Irish Glass Bottle site in Ringsend  during the year and in September, NAMA sued him personally in Dublin’s High Court though just before Christmas, it seems as if his wife, Moira sued NAMA. In November, Michael was declared bankrupt in London with NAMA learning of the bankruptcy on the first morning of its court case. Reporting of the Nigerian business prompted Michael to distance himself from the project but as the year draws to a close, it seems as if there is pending litigation in Nigeria involving two McNamara companies, Drams Construction and McNamara Nigeria and a Nigerian officer of the company, which might shed intense light on the construction of the Sokoto State University. NAMA started the year by suing Sean Dunne and eventually won a €185m judgment which it has not been able to collect, and with non-NAMA banks obtaining €164m judgments against Sean later in the year, Sean seems to hold the record for adjudged personal indebtedness to date. Ray Grehan would come a close second with personal judgments of €300m and it was on 6th January that we learned that Ray had been declared bankrupt in London, with brother Danny Grehan following in his bankruptcy footsteps a few days later.  Bill Durkan’s Durkan group announced that it had paid off its NAMA loans and that it found the prospect of dealing with NAMA “most uneconomic”. Durkan was seemingly the second NAMA developer to pay off his loans, just a month after David Daly did likewise. Sean Quinn senior’s bankruptcy order was annulled in Belfast and IBRC moved quickly to have Sean, once Ireland’s richest man with an extensive property portfolio which didn’t go to NAMA, declared bankrupt in Dublin. He will be 78 when the 12-year bankruptcy period expires.  After several months of unsatisfactory negotiations, NAMA pulled the plug on Richard Barrett and Johnny Ronan’s Treasury Holdings with the appointment of receivers which prompted an intense campaign of resistance from the dynamic duo; the receivers were appointed after the expiry of a standstill agreement when investment offers were examined by NAMA. Priory Hall developer Tom McFeely was declared bankrupt in a British court though a few months later that was annulled at the behest of one of his creditors and Tom was bankrupted in Dublin. NAMA suffered its second high profile resignation with the departure of its Head of Credit, Graham Emmett who seemingly then spent eight months gardening and fishing before joining a UK investment company, which had bought NAMA loans on the eve of his joining – NAMA had previously waved goodbye to iits director responsible for the credit committee, Michael Connolly. From a interview later in the year, it seems that Graham’s departure was prompted by Minister for Finance, Michael Noonan’s request for a 15% salary waiver for all staff earning more than €200,000. News emerged of the sale of a 125-acre landbank around Cork city for just €3-4m with the pre-sales effort seemingly confined to sticking a “for sale” sign up in a field. NAMA started a year of enforcement action against Limerick solicitor and developer Paul O’Brien with the appointment of receivers to several of his companies. Justice minister, Alan Shatter launched a new visa scheme whereby visas would be granted in exchange for investment or purchase of a NAMA property – a month ago, we learned that a total of three visas have been issued but no NAMA property sold. January began with the occupation of a NAMA building in Cork city and ended with a day-long occupation of a Dublin city centre building, both aimed at highlighting NAMA’s hoarding of empty buildings. NAMA indicated it was planning to create Qualifying Investor Funds or “QIF”s which would allow investors with more than €100,000 to spare, to invest in funds of its property. QIFs or Mini-Me NAMAs were placed on the long finger despite tendering for services and as the year draws to a close, they might be shelved after finance minister Michael Noonan announced the launch of Real Estate Investment Trusts.

February 2012 – the Cortina-averse developer David Agar was said to be shocked when NAMA had receivers appointed to his companies, and David became one of the very few NAMA developers to speak out against the tactics and attitude of the agency when it came to debt enforcement. Paddy McKillen cropped up on our radar for the first time in 2012 when he won a preliminary point against NAMA in a epic battle in London’s High Court – in February it was adjudged that Paddy had a right to consultation before loans connected to him were sold and that the sale could only be to a finance company. NAMA was facing a massive damages bill with the judgment which affected its sale of €800m of loans relating to the Maybourne group of luxury London hotels to a company controlled by the billionaire Barclay brothers – luckily for NAMA, the judgment was reversed by the British appeal courts in the summer and Paddy was unable to win a further appeal, but there apparently remains an option for Paddy to commence litigation in Dublin. NAMA was involved in a hullabaloo over whether it had jeopardized 800 jobs by putting the kibosh on the partial renting of Burlington Plaza in Dublin but NAMA apparently saw the light after discussions with the IDA – jobs minister Richard Bruton rejected the notion that he had lobbied NAMA on the matter. A €120m portfolio of property in the UK controlled by NAMA Top-10 developer, Gerry Gannon went on sale and we heard that packaging mogul, Michael Smurfit had purchased Gerry Gannon’s 50% stake in the Kildare K Club, the price was initially reported to be €10m but later reports put the sale price at a more respectable €40m. Minister Noonan created an odd creature, a NAMA advisory board which sat outside NAMA and reported directly to the Minister, it was believed in February 2012 that its members would comprise former HSBCer Michael Geoghegan, Northern Ireland quango-king Denis Rooney and US leviathan investor, Blackstone’s Gerry Murphy – when the board membership was announced in March 2012, there was no Gerry but NAMA’s own chairman Frank Daly became the third member of the Troika. Some reports suggest that Gerry Murphy had turned down the role, others suggest the Government was getting concerned at Blackstone’s insinuation into the fabric of Irish business life. In London, we saw the evidence of NAMA’s massive reach when the administrators of the NAMAed Battersea Power Station site objected to NAMAed Ballymore’s plans for a nearby development. We learned that NAMA’s operating costs were €1m per working day or nearly €200m per annum with banks, lawyers and receivers eating up most of this. Following Graham Emmett’s departure and the Geoghegan report on the future of NAMA, the Agency announced a modest reorganization with the creation of a new financial role which was later filled by Donal Rooney. The Treasury Holdings fightback against NAMA’s appointment of receivers opened in Dublin’s High Court with Treasury seeking a judicial review of NAMA’s dealings with its loans and for the first time, we heard of the TAIL transaction where €20m Treasury assets were sold to its founders for a price which looked suspicious; we also saw the affidavits in the case which gave a previously-unseen insight into how NAMA did business. Following a Sunday Independent story about NAMA jeopardizing jobs at Google, the Agency fought back by issuing a statement darkly warning of “increased efforts to spread damaging unfounded stories”

March 2012 – The intensity of NAMA’s foreclosure action in Ireland seemed to peak with receivers appointed every week to a wide range of smaller developers and we learned during the month that NAMA had receivers appointed to 165 of its 610 (Republic of) Ireland developers compared to just 15 of the 180 in Northern Ireland – the difference was stark 27% in the Republic versus just 8% in Northern Ireland. NAMA’s accounting for interest income was probed in the Dail following scathing comments from Fianna Fail’s Sean Fleming in February when he warned of an imminent showdown with NAMA on its labyrinthine accounting for interest income which includes predictions of future interest receipts.  NAMA announced €2bn of vendor financing or staple financing  which would help it shift its colossal Irish commercial property portfolio – estimated on here to have a current value of over €6bn. NAMA had receivers appointed to Alastair Jackson’s Eassda Limited which was responsible for the development of the Gleann Riada development in Longford. NAMA had the first of three appearances before an Oireachtas committee in 2012, and told the committee that the €7.5bn redemption target of its bonds by the end of 2013 was now copper-fastened into the Memorandum of Understanding with the IMF, in fact it wasn’t “copperfastened” until Minister Noonan chose to copperfasten it in May 2012. Paddy McKillen’s long-anticipated case against the Barclay brothers opened in London’s High Court – the secretive developer broke cover and the black-and-white photograph of formally-attired Paddy at an 1989 function gave way to a images of a colorfully tanned spry, silvery-fox who gave evidence in the case which was to last 40 days and which eventually gave rise to legal costs alone of €25m. Paddy was alleging the Barclays had acted improperly in their quest to wrest control of the Maybourne hotels from Paddy. The judgment in August was a comprehensive defeat for Paddy but as we end the year, the indefatigable Belfast-born citizen of the world has secured an appeal which is set to be heard from February 2013. There was shock as NAMA lost its case against Treasury Holdings in Dublin’s High Court with a judge paving the way for a judicial review of how the Agency had dealt with Treasury’s loans.  We had a narrow glimpse into NAMA’s disposal activities which see €500-750m of assets disposed of each month EVERY MONTH by reference to the underlying book values of loans. NAMA sold the Liam Carroll developed Anglo HQ  shell in north Dublin docklands to the Central Bank of Ireland, though it took more than another six months for the deal to be finally concluded, but in London we saw that NAMA was really offloading by bucketloads with the €150m sale of a Seamus Ross’s Mennolly Homes office block. Sinn Fein really got stuck into NAMA with a blistering barrage of questions which uncovered slow progress at NAMA which belied NAMA statements. Both Fianna Fail and Sinn Fein tabled legislation to abolish Upward Only Rent Reviews in commercial leases, the reform of which had ultimately been dismissed by Minister Noonan three months previously, both Bills were defeated in practice though as the year closes, a champion for the reform of UORR leases, John Corcoran continues a high profile campaign.  NAMA’s dignity was offended as Minister Noonan launched his three-card trick in the Dail which saw NAMA funding the payment of the Anglo promissory note for a three month period until Bank of Ireland agreed to fund the payment for a further year. Minister Noonan directed NAMA to carry out the transaction, the largest single transaction in the Agency’s history and the Agency complied but didn’t issue a press release.

April 2012 – NAMA lost its High Court case against Michael Whelan’s Moritz Developments and related companies. It had been seeking €300m-plus judgments but the judge accepted the legal argument, no doubt marshaled by Moritz’s solicitors Noel Smyth and Partners that the judgment was premature. It was a temporary reprieve for the company but the presence of Noel Smyth who is in his own right a significant NAMA developer who has relocated to London in recent times, was noteworthy. In London, the Paddy McKillen case rumbled on and we had the odd snippet of a claim about NAMA such as the claim that they were personally incentivized by the prospect of earning “millions”, something NAMA rejected. The NAMA chairman Frank Daly gave a radio interview in which he darkly warned developers who fly off to London for bankruptcy that the Agency doesn’t lose interest in them even when they emerge from bankruptcy. A second mansion in Connecticut connected to Sean Dunne is sold for millions – NAMA itself sells a block of apartments beside London’ Olympic Village for €170,000 apiece. NAMA publishes a split of its property available for social housing – we remember that environment minister, Phil Hogan announced the previous December 2011 that 2,000 NAMA homes would be provided for social housing, as this year concludes, it seems that just 133 have been provided to date and 58 of these were provided in the Beacon South Quarter in the summer of 2011. We learned that Dublin property company Spain Courtney Doyle was based in London and within months, we learned that two of the founders had been declared bankrupt. As the year draws to a close, it seems that more than 20 Irish developers have been declared bankrupt in London though in the aftermath of Bank of Ireland’s victory in stopping the O’Donnells, Brian and Patricia, it seems that UK courts might be adopting a tougher line in enforcing rules on centres of main interest. It was announced in April 2012 that NAMA was continuing to pursue the original NAMA UK bankrupt John Fleming over a pension, despite John’s bankruptcy term having concluded the previous November. Minister Noonan announced NAMA’s results for 2011 of a €200m profit, though by the time the audit was concluded and the final report published in July, that had dwindled to €12m. Minister Noonan also announced the review of NAMA in 2013 which is anticipated in the NAMA Act – this will offer yet another opportunity for the politicians to meddle in the independent Agency.  NAMA’s most senior man John Mulcahy and a portfolio manager, Paul Hennigan took to the witness stand in London where they gave a creditable account of themselves and the Agency. As the year draws to a close, there is still a fugue of controversy hanging over Paul Hennigan as it was revealed in court that he shared confidential information with a party in the case.  Minister Noonan announced that the 17% stake in NAMA owned by Irish Life and Permanent was sold but despite attempts over ensuing months, Minister Noonan was unable to confirm the buyer until October 2012; the sale was forced by the imminent reclassification of NAMA debt as national debt since the nationalization of Irish Life meant the Government controlled 66% of the Agency and any pretence of independence with Eurostat was in jeopardy. NAMA’s pursuit of developers and associates in Dublin’s High Court continued apace with news that the Agency was suing Limerick developer and yachtsman, Ger O’Rourke and wife Majella. By the end of 2012, NAMA will have initiated nearly 40 applications in the Irish High Court during the year though it has been on the receiving end of 11.  NAMA sells a second landbank around Cork city in controversial circumstances where the property wasn’t offered on the open market. We learn that NAMA has a €5bn mountain of cash as the country struggles with over 14% unemployment.

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