Test – 12 November 2018

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NAMA sued in Dublin’s High Court

A fortnight ago, it was reported on here that NAMA was one of the parties being sued in Dublin’s High Court in a case involving what appears to be a Portugese property development. Yesterday, the plaintiffs in that case, Tony Ward and James Hiney, lodged two applications naming the same defendants,

(1) GERRY FAGAN T/A OCEANIO DEVELOPMENTS GERRY
(2) MORGADO DA LAMEIRA – EMPREENDIMENTO TURISTICO E GOLFE S.A
(3) OCEANICO LUSOIRLANDES – INVESTIMENTOS IMOBILIARIOS E TURISTICOS SA
(4) IRISH BANK RESOLTION CORPORATION
(5) NATIONAL ASSET MANAGEMENT AGENCY

James Hiney is joined in his application – 2012/12954 P – by Sabina Hiney and both plaintiffs are represented by McCartan and Burke solicitors. Tony Ward has a separate application – 2012/12952 P – and he too, is represented by McCartan and Burke solicitors.

Given that this is Ireland, we can’t access the application itself to see what is at issue or what remedies are sought.

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Irish residential rents continue strong growth

This morning, Ireland’s Central Statistics Office (CSO) has released its inflation figures for November 2012. The monthly headline Consumer Price Index (CPI) fell by 0.4% compared to October 2012, and is up just 0.8% year-on-year. November’s results mirror those ofOctober and  September and continue a subdued trend seen in recent months compared with the 2%+ that pertained before January 2011. If this low rate of annual inflation continues and is representative of the components of GDP and if our real GDP does in fact grow by 0.4% as forecast by the European Commission in October 2012, and if the €13bn year-to-date deficit recorded in the November 2012 Exchequer Statement worsens, then Ireland may miss the 8.6% deficit:GDP target as set out in the Memorandum of Understanding with the so-called bailout Troika, which may herald intensified austerity with bigger budget adjustments. The Budget 2013 forecasts indicated Ireland would conclude the year with an 8.2% deficit, but evidence  countering this low figure mounts.

Housing has stopped being the biggest driver of annual inflation, mostly because mortgage costs have been declining – by 17.1% 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 on the other hand, which account for 5% of the total basket examined by the CSO, have risen by 8% in the past 12 months, mostly driven by the 9% price hikes at the ESB, and in October 2012 at Bord Gais.

Elsewhere, private rents rose by 0.6% in the month of November 2012 – this after a 0.7% monthly increase in October 2012 and a 0.9% increase in September 2012, a flat month in August and three months of declines in April-June followed by a small increase in July – and over the past year, such rents are up by 1.8% 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 6.1% increase (mostly recorded in February and October 2011 and February and September/October/November  2012).

Rent assistance levels have not been affected by the recent Budget 2013, neither the rates nor contribution have changed.

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Mortgage crisis deepening as pace of mortgage arrears starts to pick up again

[CORRECTION: This morning’s release of arrears and repossession data from the Central Bank contained a footnote which referred to changes to previous quarters’ data due to “reclassification”. The footnote was overlooked on here and the figures below have now been updated to reflect the previous quarters’ data published by the CBI. The adjustments extended to overall mortgage numbers, and it would be interesting to see how that “reclassification” came about. The original release for Q2,2012 is here.

The blog has also received the latest figures from the UK’s Council of Mortgage Lenders – arrears are in this Excel spreadsheet and repossessions are in this Excel spreadsheet. The latest annual numbers are little changed to previous numbers.

The reclassified figures from the Central Bank show that the pace of increase in mortgage arrears over 90 days have decreased slightly. In Q2, 2012 the increase from Q1, 2012 was 7.1% whereas the increase from Q2, 2012 to Q3,2012 is slightly less at 6.3%. In Q2,2012 an extra 5,356 mortgage accounts fell into arrears of over 90 days and that reduced very slightly to an extra 5,111 mortgage accounts in arrears in Q3,2012.

The revised figures show that the number of mortgage accounts did fall in Q3,2012 by 3,000. This followed a revised increase in mortgage accounts in Q2,2012 of 1,000 which was the first increase since records began in Q3,2009.

Contrary to what the Irish Bank Federation claims in its press release today, the number of sub-90 days arrears accounts has actually increased from 47,162 in Q2,2012 to 49,482 in Q3,2012. The IBF says there has been an “underlying decline” which is wrong.

Overall, the figures today show that all accounts in arrears are up 7,431 in Q3,2012 compared with an increase of 5,256 in Q2,2012 and on both an absolute and relative basis, the pace of deterioration has increased.

Here are the revised figures – click to ENLARGE

Here are the revised Ireland and UK figures

]

[NOTICE: The Central Bank has this morning published Q3,2012 data but it has also adjusted previous quarters’ data and this is now being checked with the Bank. For example, the Q2,2012 press release from the Bank is here, but this morning’s data shows significantly different data for Q2,2012]

This morning, the Central Bank of Ireland has published its quarterly series of arrears and repossession statistics for both owner-occupied homes and for the first time, Buy to Let mortgages. The figures are available not available from the Central Bank’s website yet, but the Irish Times seems to have had an advance copy to prepare this report. Below is the historical position on owner-occupier mortgage accounts – click to ENLARGE.

The above shows that the slowing down in the rate of new arrears has reversed and mortgage arrears are now growing at their fastest rate since the end of 2011. The only positive detail is the number of mortgage accounts has increased for the first time since records began in Q3,2009.

In addition to arrears over 90 days, some 43,742 accounts have been “restructured” – these may be paying interest only or smaller-than-contracted sums or in some cases, may not be repaying anything whatsoever.

Today’s figures show that 17% of owner-occupier mortgage accounts are in arrears over 90 days or have been restructured. Some 17,000 homes in Ireland also receive welfare payments in the form of mortgage interest supplement. It is not clear if any of these payments are to mortgage accounts that are in arrears or restructured. A further 49,482 mortgage accounts were in arrears of less than 90 days at the end of September 2012, but such arrears can oftentimes be cleared. But on the face of it, up to 26% of Irish owner-occupier mortgage accounts are in arrears, have been restructured or are in receipt of Government aid.

The figures today show that 154 properties were repossessed in Q3,2012 which is in line with previous months and means that our repossession level remains at a very low level compared to international standards, for example in the US and the UK.

Figures for Buy to Let mortgages today reveal that one in six mortgages is in arrears of more than 90 days. There are 149,592 BTL mortgages, of which 26,779 or 17.9% are in arrears of more than 90 days. There has been a similar rate of deterioration in these accounts since Q2, 2012 as owner occupier accounts.

The contrast between the treatment of mortgages in Ireland and our closest neighbour, the UK, is stark. Not only are arrears per 100,000 accounts more than five times the level of our neighbour  but repossessions per 100,000 accounts is one quarter of our neighbour’s rate. You are 24 times more likely to have your home repossessed in the UK if your mortgage falls into arrears than in Ireland.

There has been little progress with dealing with the mortgage crisis, and it remains to be seen if the Personal Insolvency Bill which should be passed into law before Christmas (2012) will benefit home-owners. It has been over a year since An Taoiseach responded to President Clinton’s speech at the Global Irish Forum in Dublin Castle where Bill Clinton identified the mortgage crisis as the greatest economic challenge facing this State.

UPDATE: 13th December, 2012. The Central Bank has finally published the arrears information which was due at 11am and which was circulated or leaked to media before 11am judging by the lengthy report by Pamela Newenham in the Irish Times at 11.01am.

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NAMA produces another metric-free set of annual objectives

If you’re having an annual review and agreeing your objectives with any half-decent manager, you will know what SMART stands for – Specific Measurable Attainable Realistic Timebound. Instead of having some nebulous objective which you don’t understand and which can’t be objectively measured, you agree meaningful objectives and at the end of the year, you and your manager or staff can agree if objectives have been met. It’s standard stuff.

But NAMA HQ is a SMART-free zone, and today the Agency has published its objectives for 2013 and lo and behold, there’s not a specific target or measurable objective for the 12 months of 2013 at all. It’s a good job that the senior folks at NAMA waive their bonuses because otherwise there could be a real bunfight over whether or not objectives had been met.

In fairness, there is one metric in the objectives – NAMA does estimate its operating costs in 2013 will be €140m, down from what NAMA says was €167m in 2012. In fact, NAMA’s budget for 2012 was €194m, but it seems that NAMA is conveniently ignoring receivership costs and is deducting these from proceeds of sales at companies to which receivers have been appointed.

NAMA is continuing to recruit and now employs 206 staff directly from the NTMA who are involved in the disciplines shown below (in brackets) plus 550 staff who manage smaller loans at AIB, Bank of Ireland and IBRC plus an army of service providers.

As for the objectives, they can be summarised as “NAMA will do its best”

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NAMA offering 180 more homes in 12 counties with its special 80:20 mortgage product

Despite the fact that the Property Price Register seems to show muted results for the NAMA deferred mortgage product launched on 8^th May, 2012, NAMA insists that the pilot scheme has been a success, and the Agency has today announced it is extending the scheme to an additional 180 homes in 12 counties – remember the pilot scheme announced in May 2012 only applied to 115 properties in three counties.

The NAMA scheme which NAMA calls a “deferred payment initiative” involves buyers getting a normal mortgage from one of NAMA’s designated banks – AIB/EBS, Bank of Ireland and PTSB. After five years, the value of the property will be assessed and NAMA will knock any decline in value, up to 20%, off the original purchase price. The scheme was designed to give reassurance to buyers that if prices continued to fall, then NAMA would bear the risk up to 20% over five years.

NAMA has said that it eventually hopes to extend the scheme to a total of 750 homes. The extension of the scheme announced today applies to the following properties:

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€166m sliced off the value of NAMA’s Irish commercial property in Q2, 2012

Jones Lang Lasalle (JLL) has today published its commercial property series for Ireland for Q2, 2012 – the report should be available shortly on the JLL website but for the time being, there is Jack Fagan’s report in today’s Irish Times. The JLL series is one of the two Irish commercial indices referenced by NAMA’s Long Term Economic Value Regulations (Schedule 2) and is used to help calculate the performance of NAMA’s “key markets data” shown at the top of this page. The other quarterly Irish price series is published by SCSI/IPD and will be available on Tuesday 24^th July at 3pm; because it is generally published after JLL’s, it is not used here to help compile the NWL index, but the SCSI/IPD index does historically show a very close correlation with JLL’s.

The JLL Index shows that capital values fell in quarter two, 2012 by 2.3% – this means that with the exception of Q4,2011 Irish commercial property has declined in value for 19 of the last 20 quarters and the aberration in Q4,2011 when a 1.2% increase was recorded was due to the exceptional measures set out in Budget 2012 – the reduction in stamp duty on commercial transactions from 6% to 2%, the abandonment of proposals to abolish Upward Only Rent Review terms in pre-February 2010 leases and the enhancement of capital gains arrangements for commercial property held for several years.

Overall since NAMA’s Valuation Date of 30^th November, 2009 prices have declined by 23.8%. Commercial prices in Ireland are now 65.7% off their peak in Q3, 2007. On an annual basis prices are down by 7%. The NWL index is now at 806 which means that NAMA needs to see a blended increase of 24.1% in property prices across its portfolio to break-even at a gross profit level (taking into account the fact that subordinated bonds will not need be honoured if NAMA makes a loss). NAMA acquired loans underpinned by €9.25bn of Irish commercial property. The Q2, 2012 decline of 2.3% means that the underlying NAMA property has declined by €166.5m in Q2, 2012 (€9.25bn minus 22% to Q1, 2012 adjusted for 2.3% in Q2, 2012) – so much for NAMA claiming the market was stabilizing!

Rents decreased by 1.4% in the quarter, reversing the 0.7% increase in Q1, 2012 which was itself the first increase since Q2,2008. This is unsurprising as secondary market rents have continued to slide even though there are indications of prime rents stabilizing.

UPDATE: 24th July, 2012. The “other” commercial index for Ireland has been published today by the SCSI/IPD and is available here. It shows commercial property prices fell by  2.3% in Q2, 2012 with retail falling down 2.2%, office by 1.5% and industrial by 1.5%. Prices are now down 65.8% from peak, which compares with 65.7% shown by the JLL index.

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Stop press: NAMA publishes new foreclosure list of properties

(The new properties added in April 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 March 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 a spreadsheet format shortly, available here.

 

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.

Comment and analysis here shortly.

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Is NAMA getting its timing right on the disposal of Irish commercial property?

Contrary to common perception, NAMA doesn’t have the overweening dominant position in Ireland’s residential property market that is commonly ascribed to the Agency. Sure, it is associated with 9,200 rented homes which makes it a very significant player in the residential rented market, but has only 4,000 partly completed homes in addition, so in a market with 2m dwellings, with 290,000 vacant dwellings of which 60,000 are holiday homes and where it is estimated there is a national overhang of 80-100,000 dwellings, that is, an excess over long term average vacancies, NAMA’s presence in the residential market is significant but it is not dominant.

Unlike in the Irish commercial market, where NAMA has acquired €9.25bn of loans secured by commercial property – the €9.25bn is the NAMA acquisition price as at November 2009 and it is estimated on here that the underlying commercial property is worth €6-7bn today. In a country which saw less than €0.5bn of commercial property transactions last year, NAMA’s latent influence on the commercial property market is indeed dominant.

And these loans need to be managed and ultimately resolved by 2020 when NAMA has to pay back its bonds and wind down. That’s eight and a half years away but already there is anxiety about the timing of disposals in the Irish market. And unfortunately for NAMA, it is not alone in the market, and other players may pre-emptively pull the rug from underneath NAMA. The latest mega-block of loans to come on the market is the AIB so-called “Project Kildare” reported by the Financial Times yesterday. Seemingly worth €675m at par value, the loans might only be worth less than half that today in Ireland, a market where commercial property has already fallen 65% from the peak in 2007, and despite the stimulus package in the last Budget announced in December 2011, prices still seem to be sliding according to the two commercial property indices from Jones Lang LaSalle and SCSI/IPD..

The sale process for Project Kildare is being run by Morgan Stanley, according to the FT.Elsewhere Lloyds Bank is offloading €360m of commercial property loans under its “Project Prince” scheme and Ulster Bank is making slow progress in the sale of a €1bn portfolio first announced on here in March 2012. Meanwhile IBRC has a €17bn portfolio of loans including commercial real estate loans it needs dispose of within the next six years. Bank of Ireland and AIB have both substantial 2014 deleveraging targets which will see even more commercial property loans come onto the market. So we’re all set on the supply side of the market, the question is who will buy all of these assets? NAMA announced last week that it expects to make €2bn of staple finance available on its commercial assets, and the view on here is that all of this will be offered in Ireland.

NAMA is understandably upbeat about the prospects for a stabilisation or recovery in Irish commercial prices, but with €6bn-plus of commercial property loans under their belt, they would say that wouldn’t they. NAMA has prioritised the disposal of non-Irish property/loans, but sooner or later, it will need confront this elephant on its books.

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Osborne King auction in Belfast a bit of a flop

Yesterday at the Holiday Inn in Belfast, Osborne King held one of their now regular property auctions – the catalogue is here, the results are here and are summarised below. 18 lots were up for grabs though on the day, only 16 were offered as one was sold beforehand and one was withdrawn. As with the Allsop Space auctions in Dublin, Osborne King use the concept of  “maximum reserves” so punters know in advance the price above which a winning bid is guaranteed to get the property. Yesterday six of the 16 properties didn’t reach their reserves so overall the auction saw prices achieve being 33% above maximum reserves and a 63% success rate, considerably down on Allsop Space’s 90%-plus performance with far higher volumes of lots. Overall the result was also considerably behind the last Osborne King auction in Belfast in December 2011 when a 82% success rate was achieved and the overall sales total exceeded the maximum reserves by 8%. I don’t have a report from the auction floor yesterday but it seems that the secondary market in Northern Ireland might have a finite cash ceiling available to it, though another interpretation is that Osborne King’s pricing of maximum reserves this time round was not as accurate as last time (8% above max reserves in December 20111 when sales were achieved, 33% yesterday).

 

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