Archive for March, 2015

Irish property prices fall for second month in a row

Residential property prices in Ireland fell by 0.4% in February, the second monthly decline in a row, the latest index data shows.
The fall last month comes on the back of a 1.4% decline in January amid concerns that the country’s real estate recovery could be stalling.

In Dublin, the decline was more pronounced, with average prices falling by 0.7%, according to the data from the Central Statistics Office.

However, despite this fall, residential property prices remained up 14.9% on an annual basis. In Dublin property prices were still 21.4% higher than in February 2014.

A breakdown of the figures shows that Dublin house prices fell by 1% in February whilst Dublin apartment prices increased by 2%. However, a spokesman said that it should be noted that the sub-indices for apartments are based on low volumes of observed transactions and consequently suffer from greater volatility than other series.

In the rest of Ireland residential property prices were unchanged in February. However, prices were still up 8.2% compared with February 2014.

At national level residential property prices were 38.7% lower than their peak level in 2007. Dublin house prices were 37.6% lower than their peak, Dublin apartment prices were 43.3% lower than their peak and Dublin residential property prices overall were 39.3% lower than their highest level. Outside of Dublin residential property prices were 41.9% lower than their highest level in 2007.

‘With prices continuing to rise more quickly than earnings affordability constraints are beginning to have an impact. This has removed some of the heat that was evident in the market in the middle of last year,’ said John McCartney of Savills.

‘Agents are now reporting that buyers are no longer in a frenzy to buy for fear that prices will run beyond their means. This is a very positive development as expectations of rapid price growth can become self-fulfilling and can quickly lead to overheating,’ he added.

It is a welcome slowdown in Irish house price inflation rather than a collapse in prices, according to Conall MacCoille, chief economist at Davy Stockbrokers, who said at over five times average incomes, house prices no longer look cheap.

‘This slowdown is not surprising or undesirable. Ideally, Irish house prices will now rise in line with nominal wages so affordability is not stretched further,’ he explained, adding that it was too early to say what kind of dampening effect new central bank restrictions on mortgage lending will have.

The Economic and Social Research Institute (ESRI), an independent think-tank partly funded by the Irish government, said that while the measures may slow down house price growth, this could come at the expense of rising rents and fewer houses being supplied amid major shortages of supply in Dublin.

Source: Property Wire

Osborne Accelerates £58bn Bank Asset Sell-Off

The Government is to accelerate the sale of tens of billions of pounds of mortgages and loans taken on by taxpayers during the banking crisis.

Nama NI debtors treated ‘less than sympathetically’, MPs told

First Minister Peter Robinson described the sale of the loans to Cerberus last year as “excellent news”. Photograph: Brian Lawless/PA Wire
First Minister Peter Robinson described the sale of the loans to Cerberus last year as “excellent news”

Former Nama debtors in Northern Ireland are being treated “less than sympathetically” by the US-based investment firm that bought their loans, British MPs have been told.
In a major report on the North’s banking, the House of Commons’ Northern Irish Affairs Committee complains about the lack of commercial lending by banks in the North, repeated IT failures and a drive to close rural branches.

Northern Ireland property loans held by Nama and worth £3.5 billion to £4 billion (€4.9 billion to €5.6 billion), were sold to Cerberus Capital Management last April “for around £1.3 billion”, a sale described at the time by First Minister Peter Robinson as “excellent news”.
Minister for Finance Michael Noonan welcomed the report and said it was a good result for the taxpayer.

Liquidator Kieran Wallace of KPMG will announce a significant surplus has resulted from the liquidation, after funds are repaid to secured creditors.

Cerberus told MPs it “would be acting in the best interests” of Northern Ireland and, like Nama, would not seek quick fixes by embarking on a “fire sale” that would drive down property prices.
“However, since our meeting with Cerberus,” the MPs said, “we have heard disquieting stories from some businesses in NI that they are being treated by Cerberus in a less than sympathetic manner.”
Property prices remain “a cause for concern”, the MPs said, adding that the warning from accountancy firm PwC that it could take another decade for prices to return to pre-crash levels made “for sobering reading”.
Regional data
The main banks operating in North – AIB-owned First Trust Bank, Bank of Ireland, Danske Bank and Ulster Bank – do provide regional data, and Santander should be “strongly” told that it needs to do the same.

All of the banks should draw up a clear standard to identify new lending, or else face one imposed upon them by the Treasury, which should come into force next month.
Even though MPs acknowledged that technology is changing banking habits, they complained that Northern banks “have shown relatively little concern for their customers by their plans to close branches in small towns”.

Highly critical of the banks’ IT systems, MPs said it is clear that most are not fit for purpose and should be rapidly upgraded now that the banks are back into profit.
The inquiry into the collapse in Ulster Bank should be published without any further delay by the bank or the Financial Conduct Authority, the committee said.

Source- Irish Times

PTSB preps final Irish loan sale

Permanent TSB is preparing its remaining €900m of Irish so-called non-core loans for sale in a single portfolio in the coming months.

Dubbed Project Connaught the portfolio is understood to be largely made up of hundreds of commercial property loans and buy-to-let mortgages – in many cases the loans are thought to be either non-performing or in negative equity.

Analysts had expected to see a new Permanent TSB sale within weeks. However, the bank is understood to be combing the loans for any hidden value – including any assets that have recovered in value thanks to recent property market moves – before signing-off on a sale process which is tipped by market sources to come at a steep discount to the face value of the loans.

Financial results published last week by the bank suggest the remaining Irish non-performing loans have a net value of around €600m.

An auction process is still expected before the summer, as the bailed-out bank continues shedding non-core assets rapidly.

It confirmed the sale of loans with a face value of €5bn last week, including its Munster and Leinster Irish non-core portfolios sold to a consortium led by Deutsche Bank.

Those two Irish portfolios had a combined face value of €1.5bn, but a net value at the time of the sale of just €800m, the Irish Independent has learned.

In contrast the CHL book of UK residential mortgage loans the bank has also agreed to sell to US private equity firm Cerberus had a gross and a net value of €3.5bn, the bank said in a presentation to investors.

That valuation has been boosted by a massive €300m since the start of this year by the sharp fall in the value of the euro against sterling, according to the same presentation.

With €3bn in gross value of British loans also earmarked for sale this year by the bank, any further weakening of the euro could dramatically improve Permanent TSB’s recovery on the loans.

The bank said it will look to sell the UK loans at a discount to gross value of “no more” than 10pc.

Permanent TSB is halfway through a process of shedding non-core assets that it aims to complete by the end of this year.

The sales, once completed, will result in a slimmed-down Ireland-only retail bank targeted at mortgages, credit cards and consumer lending.

Irish Independent

Economy is on course to reach pre-crisis peak

The economy is set to swell to its pre-crisis peak this year, experts are forecasting.

ew figures show economic growth in 2014 was the fastest in seven years, outstripping any other European country and expanding at just over five times the eurozone average.

Experts now predict the economy may be bigger by the end of this year than it was in the peak of the boom, but will be much more evenly balanced than the construction-focused Celtic Tiger era.

Britain returned to pre-crisis levels last year. Ireland’s population has been growing since 2007, which means that economic output per person will be slower to return to pre-crisis levels.

The economy grew by 4.8pc in 2014, fractionally above the 4.7pc forecast by the Government, according to the first estimate of 2014 growth from the Central Statistics Office (CSO). That compares with 0.9pc in the eurozone and 1.3pc in the European Union as a whole.

Economists hailed the data as showing the strength of the recovery, with one expert predicting Ireland will top the eurozone growth league table again this year.

“You’re probably going to see the pre-crisis peak being reached or being surpassed,” said Philip O’Sullivan, economist with specialist bank Investec.

“It’s important to note that the nature and composition of the economy has shifted as well. The previous peak was artificial as it was led by a housing bubble.”

But business lobby group Ibec pointed out that company wealth is still lower than pre-2007 levels, that many households and firms still do not feel the effects of the recovery and that the gains are centred mainly in urban areas.

And while the economy continues to grow strongly, separate figures released yesterday show deflation remains a worry after consumer prices fell for the third month in a row.

But the strong recovery is staving off concerns that Ireland will fall into a deflationary spiral, which could dent the economy and lead to a prolonged period of low prices.

Finance Minister Michael Noonan said economic growth was now broadly balanced.

“The turnaround that we are seeing in the Irish economy is a direct consequence of the policies pursued by this Government and the sacrifices made by the Irish people,” Mr Noonan said.

Positive

The positive economic data comes as Mr Noonan announced that a 25pc stake in state-owned AIB is expected to be sold on the London Stock Exchange by October.

And €2bn raised from a previous sale of Bank of Ireland rescue loans and a repayment to the State of a loan to Permanent TSB will be used to repay debt from the International Monetary Fund (IMF) early.

The CSO data showed that the economy was firing on all cylinders last year, with net exports and domestic demand both contributing to the growth figure.

“When you look back over the years we don’t see a similar result,” said the CSO’s Michael Connolly, as he detailed the results yesterday.

“It’s the improvement in domestic demand that is the most striking.”

The economy last year, as measured by gross domestic product (GDP), was €181.33bn. That compares with €168.62bn in 2010.

Goodbody stockbrokers is forecasting that by the end of this year, the economy will expand to €188bn.

“Today’s GDP data confirms that the Irish economy is on a totally different growth trajectory to the rest of Europe,” said Goodbody economist Dermot O’Leary.

“A breakdown of the contributions to growth in 2014 reveals that the recovery in the Irish economy not only strengthened last year, but it also became more broad-based.”

Alan McQuaid of Merrion Stockbrokers said the economy was on track to be the fastest growing economy in the eurozone again this year.

“Ireland has benefited from its close trading ties with the US and UK, two of the strongest performers on the world stage in the past 12 months,” Mr McQuaid said.

“Competitiveness gains made against the rest of Euroland in recent years have also helped.

“But the most encouraging aspect is the pick-up in domestic demand, which augurs well for 2015.”

And he said that the sharp fall in the value of the euro against both the dollar and sterling would also be a boon for the economy.

But Ibec said the economy remained 5.7pc below its 2007 peak in value terms, with households and firms in many parts of the country not experiencing the recovery.

“Feedback from companies suggests the recovery remains heavily concentrated in urban areas,” said Ibec economist Fergal O’Brien.

Despite the strong recovery, however, separate data shows that consumer prices continue to fall here.

But most economists aren’t worried. “Ireland is not in our view on the brink of dangerous deflation,” Mr McQuaid said.

Source- Irish Independent

Banking Inquiry: Bankers acted as touts for developers

Bankers acted as touts for developers during the housing boom the Banking Inquiry has been told.

Author and journalist Frank McDonald described a scene where “frequently it was the bankers who spotted the potential of a well located site” which they would then line up for a developer and provide the loan.

His impression was that there was “no control being exercised at all in relation to the lending of money” by these banks.

Mr McDonald, a former Environment Editor of the Irish Times, referred to the “frenzy” of land re-zoning at the time and said he had “no doubt that corruption lay at the heart of Dublin County Council’s most contentious land rezoning decisions” and in other local authorities too.

“Otherwise decisions made by elected representatives against the advice of planning officials are almost inexplicable”.

Mr McDonald talked about the frenzy of rezoning during the boom where so much land was being zoned it could cater for decades of development.

“The availability of lucrative tax incentives combined with cheap credit and laissez faire practices, both in the banking and planning sectors, created and sustained the property bubble,’ he said.

He suggested the Banking Inquiry needed to ask former ministers for finance of the period precisely why they decided property tax incentives should remain in place for so long.

This was at a time when the construction industry was having “its biggest, most profitable spree ever.”’

To persist with these incentives “when construction was leading the boom was the height of folly.

As more and more investors availed of them, he added, a whole sector of society had a major vested interest in ensuring that the incentives continued for as long as possible.

The Government, he said, even used escalating house prices in Dublin to promote its controversial “decentralisation” programme, urging public servants with homes in Dublin to sell and buy cheaper homes in other locations.

The advent of motorways “facilitated and encouraged the sprawl of Dublin and other urban centres”.

This led people “to imagine that they could live up to 100km from where they worked and get there and back by car”.

Ordinary people became so caught up in the bubble that “we couldn’t see it in perspective, or at all.

“It became normal that fairly average semi-detached houses could be “worth” a million euro or more.

“Every day, banks sought to persuade us to take out loans for new cars, holidays, home improvements, or whatever — and we did, in droves.”

Earlier the inquiry was told that Whistleblowers should get financial rewards and politicians should be required to publicly disclose their debts.

The recommendations were made by Dr Elaine Byrne, a specialist on corruption, governance and white collar crime.

She said monetary awards for whistleblowers were used in the US and ranged between 10pc and 30pc of the money collected where high quality information led to enforcement action of over $1m in sanctions.

Dr Byrne told Senator Sean Barrett that the whistleblower scheme was working very successfully in the US where whistleblowers working within the banks had been paid $7m.

She also said a “culture of deference” between State authorities, political representatives, banks and the property sector and pointed to the “significant increase” in disclosed financial donations to individual politicians in election years.

Fianna Fail representatives “attracted almost twice as many” of these donations as all other parties combined during the 2002 and 2007 general elections.

This was not surprising, she explained, as Fianna Fail traditionally ran more candidates, nonetheless in the 2002 election their candidates received seven times more disclosed donations than candidates from other parties.

Asked by Chairman Ciaran Lynch if the level of donation determined the outcome of the election, Dr Byrne quoted Frank Underwood of the Netflix series House of Cards.

She quoted: “power is more important than money but when it comes to elections money gives power, well, a run for its money.”

She agreed with a suggestion by Deputy Michael McGrath that political donations were sometimes related to seeking to influence power.

Dr Byrne said tax incentives for property in the run up to the crash brought much needed investment but “the problem was that they went on too long.”

She felt it would be helpful if the Banking Inquiry considered a list of tax incentives granted by Government to developers and investors between 1997-2007 and why these were extended beyond their natural life span.

It could also look at how many politicians or their close associates received interest free loans or mortgages on favourable terms or loans received outside of normal lending practices.

Source- Independent.ie

Santander and Deutsche Bank fail US ‘stress tests’

Santander and Deutsche Bank have failed a US “stress test” designed to assess whether lenders can withstand another financial crisis.

The review, carried out by the Federal Reserve, gauges whether the biggest banks operating in the US have the “ability to lend to households and businesses even in times of stress”.

Another institution, Bank of America, has been asked to revise its financial plans due to “certain weaknesses”.

A further 28 banks passed the tests.

Officially known as the Comprehensive Capital Analysis and Review, the tests were implemented in the aftermath of the 2008 financial crisis, in which some lenders needed bailouts from the US central bank.

Doomsday scenarios
All banks with more than $50bn (£33.5bn) in assets are subject to the annual examinations, which assess the corporations’ ability to deal with “doomsday” scenarios, such as rising unemployment and plummeting house prices.

The 31 lenders tested this year – which together account for roughly 80% of the banking sector – were all deemed to have enough reserve cash to deal with a shock, but the Fed found fault with Santander and Deutsche Bank’s financial plans.

In previous years, banks that failed the tests were forced to suspend dividend payments to shareholders, and international lenders can be prevented from sending their earnings back to their parent companies.

In a statement reacting to the Fed’s announcement, Germany’s Deutsche Bank said it had hired 1,800 employees “dedicated to ensuring that its systems and controls are best in class”.

Santander’s US chief executive, Scott Powell, said the bank, which failed some of the Fed’s tests for the second year in a row, still had “meaningful work to do to meet our regulator’s expectations and our own standards of excellence”.

However, the Spanish bank added that it had not been prevented from paying dividends.

Buybacks
Following news that they had passed the Fed’s tests, several large US banks announced share buybacks – signalling long-anticipated paydays for investors.

Citigroup, which failed the tests last year, will buy back $7.8bn and strongly increase its dividend, while American Express will buy back $6.6bn in stock.

Bank of America said it intended to buy back $4bn worth of shares, but only once it had addressed what the Fed called “deficiencies in its capital planning process”.

The bank has to submit revised plans to the Fed by 30 September.

“We are committed to meeting the requirements in the time frame the Fed has established,” said Bank of America boss Brian Moynihan, in a statement.

Source BBC News

NAMA launches sale of £226m Project Albion UK loan portfolio

NAMA yesterday launched the sale of the £226m Project Albion non-performing loan portfolio, in the Irish bad bank’s first ever multi-borrower loan portfolio believed to be comprised of legacy Allied Irish Bank loans secured by predominantly UK commercial properties.

Project Albion is comprised of 22 loans across eight separate borrower connections and secured by 25 assets, and marks a departure of loan portfolio sales comprised exclusively of one borrower connection per loan transaction.

One of the borrower connections is secured by collateral in the Netherlands. All but one of the 22 loans are in default.

CoStar News understands that Project Albion, which is the oldest historic name for the British isles, has a gross annual rental income of around £6.5m and a weighted average unexpired lease term of around three years.

Assets includes seven offices, one high end hotel and leisure asset, one stabilised industrial estate in Scotland, five residential investment properties in regional cities and more than 300 acres across of strategic land across 10 separate sites.

In addition to Project Albion’s £6.5m annual gross rental income is projected EBITDA for the luxury hotel of around £1.2m for 2015.

First round non-binding bids have been called for 10 April.

Cushman & Wakefield’s Corporate Finance team in London has been mandated to sell Project Albion in one of four loan portfolio sales awarded to the team by NAMA.

NAMA is currently selling six separate loan portfolios – projects Arrow, Tolka, Jewel, Milner, Abbey and Albion – for a combined nominal value of approximately €12.9bn, although these loans will in certainly have been purchased for well below the blended 58% discount when NAMA was established.

the €8.4bn Project Arrow is secured by approximately 90% Irish real estate and 10% UK real estate, and is virtually all non-performing. For the full story, please click here;
the c.€1.5bn Project Tolka, secured by the loans of developers Paddy Kelly, John Flynn and Alanis, a property investment company controlled by the McCormack family;
the c.€1bn Project Jewel, secured by Chartered Land’s Dundrum Town Centre, as well as two smaller shopping malls – for the full story, please click here;
the €778m Project Milner, secured by Gerry Barrett’s 10-strong property portfolio comprised of 10 assets including the G Hotel in Galway and the D Hotel in Drogheda;
the c.€700-750m Project Abbey, the loan book of Pat Doherty’s Harcourt Developments. KPMG is selling the loan portfolio; and
the £226m Project Albion, a predominantly UK commercial property loan portfolio comprised of a eight borrower groups. There is also some exposure to assets in the Netherlands.
Cushman & Wakefield’s Corporate Finance team is mandated across four of the six loan portfolios – including a joint mandate with Lisney on Project Arrow, which is thought to be highly granular with loans around €5m and below and an aggregate real estate value below €1.5bn.

Project Arrow is expected to trade before the year end.

Separately, NAMA is understood to have issued requests for proposals for Project Jewel within the last week or two.

All parties declined to comment.

SOURCE – Co Star Finance

Ulster Bank: George Osborne wants to quickly sell UK stake in Irish bank’s parent RBS

London wants to sell its near-80pc stake in Ulster Bank parent RBS as soon as possible after the general election.

Chancellor George Osborne told the Financial Times that he made a mistake in failing to radically restructure RBS in 2010, and wants to put it into the “good hands” of the private sector.

Mr Osborne said he regrets believing that RBS’s investment bank would be a viable business extending across the world.

The investment bank is now shedding thousands of jobs.

The UK government bailed out RBS to the tune of £45bn during the financial crisis.

To get its money back it needs to sell its shares at an average of £4.55 apiece, the newspaper said.

The shares are currently trading at around £3.80.

Reuters

Banks now seeking to repossess 1,000 properties a month

Banks are applying to the courts to repossess almost 1,000 homes a month, new figures show.

he figures show there has been a 10-fold rise in the number of repossession proceedings being issued in the courts by all the banks since 2013.

And most of the applications are for family homes.

There were 11,500 applications made by all the banks to the courts for repossessions last year, figures supplied by the banks to the Central Bank show.

This is a much higher figure than those reported by the Courts Service for repossession applications in circuit courts around the country.

Experts said the figure supplied by the banks to its regulator was a more accurate figure. Some of the applications may have been missed when Courts Service data was being compiled, the experts said.

For the three-month period up to last December, more than 2,500 applications were made by banks to repossess properties. This is 10 times higher than the level of applications at the start of 2013, figures complied from Central Bank data by both UCC lecturer Seamus Coffey and Free Legal Advice Centre’s (FLAC) Paul Joyce show.

Mr Joyce, who is senior policy analyst with FLAC, said: “The State’s own figures show that the number of repossession applications on family homes is rising inexorably, and will continue to do so as lenders deal with those cases where arrears difficulty has become more entrenched.”

He said Central Bank figures indicating almost 38,000 households have been in mortgage arrears for more than two years show the extent of the problem.

There needs to be free independent financial and legal advice for those at risk of losing their homes; an independent State body, such as the Insolvency Service, tasked with assessing if mortgages are sustainable; and a radical expansion of the mortgage-to-rent scheme.

This is where a housing charity buys the family home at current market values where families can no longer afford the mortgage. The bank writes off any residual debt owed.

The family can choose to rent it from the charity, with a local authority providing rent support.

Finance Minister Michael Noonan said: “What the figures show is the banks using the courts to get people to engage with them who haven’t engaged.

“The Government position is we don’t see repossession as a solution and we don’t want repossession to be a solution.”

He said thousands of mortgages were being restructured by the banks every month.

Fianna Fáil’s finance spokesman Michael McGrath accused the Government of being paralysed on the issue.

“The Government seems to be totally paralysed in the face of a very aggressive stepping-up of legal actions on the part of the banks.”

Source- Irish Independent

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