The Property market has reached the bottom!

leonardjos

AARRRGH wrote: »

When you add the interest onto the 25k, you're talking at least 50k.

So you can earn 50k in one year by doing nothing.

Yes please.

Or as I like to think of it - how long would it take you to save the same sum - 5 years?! As another posted identified this would also be the equivalent of having a 25 yr mortgage instead of a 30 yr!

Looking forward to more of the same in 2010

OMD

daltonr wrote: »

Spot On.

What we do know is that there will be a cost.
We just don't know how much.

-Rd

As I keep on saying we can guess there will be a cost. We don't know the buying price, we don't know the selling price and we don't even know what is being sold.

jmayo

OMD wrote: »

Well in the medium term it does. If property prices stay at current levels for next 10 years then we are totally screwed thanks to NAMA.

So we should keep property at an inflated cost so that NAMA breaks even.
This is the whole problem with NAMA.
It is a brilliant reason for the government to try and forcibly keep property prices high and thus their vested interest buddies happy.
Oh dear God we are screwed.

daltonr wrote: »

And how much will we be paying for the loans secured against these same landbanks?

Perhaps 70% of their face value.

That's 70% of the value of the loan, not the value of the land. The land value is so far from the balance on the loan that a manned mission between the two isn't feasible with today's technology.

That's 70% of the balance of a loan that has had interest accumulating on it. So 70% of a number that is already vastly more than the original loan.
It's entirely possible that for some of these loans, NAMA will actually manage to pay more for the loan than the developer originally borrowed.

And for security? A field in ballygobackwards that's currently under 3 feet of water that has frozen into ice.

-Rd

Can anybody come up with a use for such places ?
Farming not really option at the moment

The more one looks at our two really systemic banks, AIB and BOI, the more one realises how f**ked up they have become and how badly their management managed (sorry probably incorrect verb to use in this context) to screw them up over a very short space of time. :rolleyes:

The other thing that really sickens me is that we would only have half as serious a problem if Anglo and IN were allowed to sink way back in 2008.
Neither are systemically important since both were niche players.
Now thanks to lenihan and biffo the Irish citizens (I am counting future taxpayers possibly like my toddler as well as current taxpayers) are stuck with the 30 plus billion of very toxic debts they have and the billions they are sucking in recapitalisation injections.

Make no mistake these last two have probably the worse loans that will default the moment NAMA buy them.

Also can anyone answer me why we are recapitalising a bank that primarily only lends to developers who are now technically insolvent, already owing the bank billions ?

AARRRGH

OMD wrote: »

As I keep on saying we can guess there will be a cost. We don't know the buying price, we don't know the selling price and we don't even know what is being sold.

Do you really think this government of ours are going to get it right?

As someone else stated already, it actually doesn't matter what NAMA pays, because the difference on the banks books is going to be met by the tax payer anyway.

I'm still waiting for legislation to prevent another bubble from happening. You'd think the government would have learnt their lesson, but no, they couldn't be bothered, they're already rich so don't have to worry about Ireland being screwed.

daltonr

OMD wrote: »

As I keep on saying we can guess there will be a cost. We don't know the buying price, we don't know the selling price and we don't even know what is being sold.

Are you saying that Brian Lenihan lied when claimed NAMA would overpay?

Or was he simply wrong? That despite the intention to overpay, NAMA might accidently underpay?

Just so we're clear. I believe strongly we'll overpay for the loans even if LTEV is excluded.

I KNOW categorically that we will overpay for the loans when LTEV is included.

Is it your contention that I'm not even allowed to use the word KNOW when talking about LTEV?

I'm supposed to allow for the possibility that this government that desperately wants NAMA has been making it sound WORSE than it really is?

Pass the Peace Pipe, my head hurts.

-Rd

jmayo

daltonr wrote: »

Are you saying that Brian Lenihan lied when claimed NAMA would overpay?

Or was he simply wrong? That despite the intention to overpay, NAMA might accidently underpay?

Just so we're clear. I believe strongly we'll overpay for the loans even if LTEV is excluded.

I KNOW categorically that we will overpay for the loans when LTEV is included.

Is it your contention that I'm not even allowed to use the word KNOW when talking about LTEV?

I'm supposed to allow for the possibility that this government that desperately wants NAMA has been making it sound WORSE than it really is?

Pass the Peace Pipe, my head hurts.

-Rd

No I think, forgive me if wrong on this reading of what OMD means, that either way the taxpayer is going to pay full whack ?
IMHO if NAMA doesn't pay enough, which it won't even when already overpaying for the loans, then the banks will still need recapitalisation.
At least maybe with recapitalisation we might own the banks to sell later.

In other words we will nearly pay 70 odd billion no matter if it is through NAMA or recapitalisation.
If NAMA only pay 54 billion the banks have to find the missing 20 something billion from somewhere.
And guess where is the first place they will call, but to their ever so good friends in the Dept of Finance. :rolleyes:

Again this begs the question why are we allowing Anglo continue when it is just draining cash ?

crocro

NAMA plans to pay 15% over current market value. The banks will have to take a writedown to sell at that price. The taxpayer will fund NAMA and will also fund any recapitalisations. It is possible that the whole episode will take a decade to clear and cost the state €20bn (less than a year's worth of deficit overspending)

But was there any alternative? All the parties - even labour - agreed that the banks had to be saved. That was going to cost a fortune no matter how it was done. The banks failed as a result of overlending. There were no central bank rules on lending multiples, no prohibition on 100% or interest only mortgages. We, the Irish electorate, repeatedly chose politicians to represent us who did not want to calm the boom. The only problem the parties saw with the boom was that people couldn't get on the ladder and needed more incentives and tax breaks and looser credit.

We voted for the man who said 'the boom just got boomier'. So we must bear responsibility for the costs, nobody else will.

And you can say that maybe you personally never voted for FF; in a democracy we have to accept the will of the majority and responsibility for their mistakes. Did FG and Labour promote an end to the boom? Not at all, they all ran expansionist manifestos in the 2007 election. More hospital beds! More prison places! FG even wanted an end to stamp duty to give FTBs a leg up.

We screwed up and now we must pay. The trick is not to do it a second time.

oceanclub

crocro wrote: »

We voted for the man who said 'the boom just got boomier'. So we must bear responsibility for the costs, nobody else will.

What's this "we" business? If you were dumb to vote for Fianna Fail, man up and take the blame and don't pretend we all did.

P.

crocro

We have a secret ballot so there's no way to know who voted for FF. In a democracy we have collective responsibility for the actions of the elected representatives.. A third of people didn't even bother to vote. They are equally culpable.

I've never voted for FF - not even a preference vote. But that is irrelevant.

oceanclub

crocro wrote: »

We have a secret ballot so there's no way to know who voted for FF. In a democracy we have collective responsibility for the actions of the elected representatives.. A third of people didn't even bother to vote. They are equally culpable.

I've never voted for FF - not even a preference vote. But that is irrelevant.

Oh, just **** right off, OK? **** off. Bar from launching a one-man rebellion on the Dail Eireann or attempting a suicide bombing of the cabinet, then apart from voting against Fianna Fail and marching to campaign against their financial policies, tell me _exactly_ what I was supposed to do during the last 10 years to avoid it being _MY_ fault.

Sorry, but I don't believe you didn't vote Fianna Fail. Noone except their most mindlessly sheeplike loyal supporters comes out with this "everyone's to blame so noone's to blame really" type of ****e anymore. Even Brendan O'Connor.

P.

crocro

oceanclub wrote: »

Oh, just **** right off, OK? **** off. Bar from launching a one-man rebellion on the Dail Eireann or attempting a suicide bombing of the cabinet, then apart from voting against Fianna Fail and marching to campaign against their financial policies, tell me _exactly_ what I was supposed to do during the last 10 years to avoid it being _MY_ fault.

Sorry, but I don't believe you didn't vote Fianna Fail. Noone except their most mindlessly sheeplike loyal supporters comes out with this "everyone's to blame so noone's to blame really" type of ****e anymore. Even Brendan O'Connor.

P.

PMSL

Did you canvass or contribute money or time to another party? It may not have worked because it appears to me that all the parties were boom chasing. We will never know what FG would have done in power. At least R Bruton did criticise the boom budgets when they were announced for being expansionary.

I guess the upside of democracy are the times when the system makes a better decision than you would have and yet you share in the gains.

Anyway you are getting worked up about the wrong thing. NAMA is a smaller problem than the deficit. We are borrowing a NAMA every year just to meet the current spending commitments racked up since 1997 to help FF win elections. Again, we rewarded this damaging behaviour with re-election.

Also we are OT. The property market has not reached the bottom and won't do for some time.

oflahero

oceanclub wrote: »

Oh, just **** right off, OK? **** off.

This is very unoceanclublike altogether. Who are you and how did you get his/her login? Paul Gogarty, is that you?

oceanclub

oflahero wrote: »

This is very unoceanclublike altogether. Who are you and how did you get his/her login? Paul Gogarty, is that you?

Yup, it is very unlike me, from which you can gauge how annoying I find this sort of unmitigated revisionist tripe. I mean, I don't even usually swear at Marc Coleman articles.

Unlike Gogarty, I didn't retract my statement straightaway. ("**** you Deputy Stagg. **** you. ... I apologise now for my use of unparliamentary language.")

P.

daltonr

Crocro, i agree with you.

This is IRELAND'S fault. And it's a real bitch for those of us that have seen it coming for years and been unable to stop it.

I actally accept that we will make big losses and we have to pay them. That isn't my objection to NAMA or to injections into the banks.

My objection is that the Irish people are being lied to.

It was a lie to say the banking guarentee didn't cost us. It raised the cost of borrowing.

It was a lie to say the recapitalisations would get the banks lending. That wasn't going to happen and wasn't the intention.

It is a lie to say NAMA is an investment and will break even or make a profit.

Long term economic value is a lie.

It is a lie to say that levy on the banks will recoup any losses.

It is a lie to say the ECB are funding NAMA.

It is a lie to say that NAMA doesn't increase our national debt.

It is a lie to say we're not bailing out banks when there are bank shareholders including myself who still have shares. We should have been wiped out before the taxpayer was asked for 1c.

All these lies perpetuate the myth that there is a way to avoid the inevitable.

It's what gets people thinking that they should all get bailouts or be able to walk away from debts.

If the government came out and said, as a country we screwed up. As a government we share a major part of the blame. These plans will lose money, they will cost us all, but they will work. Then I'd have no objections to their plans.

What do we have instead?

Dermot Ahern saying..'Nobody is to blame. It just happened'.

-Rd

crocro

daltonr wrote: »

If the government came out and said, as a country we screwed up. As a government we share a major part of the blame. These plans will lose money, they will cost us all, but they will work. Then I'd have no objections to their plans.

I think Lenihan admitted to mistakes (by others) and he was the first minister to refer to the boom as a bubble.

What the politicians say doesn't change the reality that there is nobody left to pay for the mess but us citizens.

I agree with all your lie statements above apart from the ECB not funding NAMA.

I understand that the ECB has agreed to repo our NAMA bonds for its own bonds. Effectively that's the same as the ECB lending the Irish government money to lend to the banks. They're not paying for NAMA but they are lending us the money for it. Clearly they have sanctioned the whole scheme and presumably have drawn it up with the DoF and the IMF.

Agent J

crocro wrote: »

I understand that the ECB has agreed to repo our NAMA bonds for its own bonds.

Here it the part i dont follow.

Is there going to be a further haircut on the bonds when they repo them?
They are hardly going to redeem at par are they?

worded

oceanclub wrote: »

Sorry, but I don't believe you didn't vote Fianna Fail. Noone except their most mindlessly sheeplike loyal supporters comes out with this "everyone's to blame so noone's to blame really" type of ****e anymore. Even Brendan O'Connor.

P.

Voting for FF is like farting, everyone does it, but no one admits to it.

daltonr

crocro wrote: »

I agree with all your lie statements above apart from the ECB not funding NAMA.

I understand that the ECB has agreed to repo our NAMA bonds for its own bonds. Effectively that's the same as the ECB lending the Irish government money to lend to the banks.

Yeah, AIB once loaned me the money for a car. I was delighted and surprised to find that you can get free cars just by asking a bank to buy it for you.

Then I discover they steal money from my account each month.

It's almost like they didn't buy the car for me at all.

-Rd

crocro

Agent J wrote: »

Here it the part i dont follow.

Is there going to be a further haircut on the bonds when they repo them?
They are hardly going to redeem at par are they?

I think the idea is that the NAMA bonds never actually transfer to the ECB, instead they are used as collateral to borrow from the ECB. Leaving aside default risk, as they have different maturities and coupons they won't be swapped 1 for 1.

daltonr

crocro wrote: »

I think the idea is that the NAMA bonds never actually transfer to the ECB, instead they are used as collateral to borrow from the ECB. Leaving aside default risk, as they have different maturities and coupons they won't be swapped 1 for 1.

Exactly. In the same way that my car never passed to AIB, they just insisted that I hold on to it.

NAMA will buy the loans from the Banks using IRISH government bonds. The nature of those bonds is that the IRISH taxpayer will have to pay the banks 1.5% interest each year.

Yes folks, on top of paying (overpaying???) for the assets, and adding something for Long Term Economic Value, we also pay hundreds of millions a year in interest to the banks.

Karl Whelan gives a good explaination over on IrishEconomy.ie
this bit in particular ties in with what we've been discussing:


Of course, this raises the question of why cash-strapped banks wouldn’t just go straight to the open market with the €X billion of Irish bonds and sell them straight away. After all, according to those who propose the NAMA approach, the government will have also bought assets that will turn out to also be worth €X billion, so its net solvency shouldn’t be affected and markets should be no less willing to buy Irish government bonds.

That’s the theory anyway. In practice, I suspect the markets will have grave doubts about whether NAMA will break even. More importantly X is going to be a big number and there is simply not likely to be a market for that large a quantity of Irish government bonds all to be sold off at once.


Karl also mentions the very interesting point that the banks will own 10's of billions of euro in Irish Bonds that they can sell on the open market. The Irish Government will also need to sell 10's of billions of euro.

Now the very banks we're bailing out are competing with us, selling the same bonds we are. If the state and the banks are both chasing the same bond buyers then the state has to offer a better deal. Hello higher borrowing rate for the state.

NAMA, the scheme that keeps on taking.

As Karl points out you'll here none of these issues discussed in the media.
I assume that's because it involves horrible complicated stuff like national school level maths.

-Rd

crocro

daltonr wrote: »

NAMA will buy the loans from the Banks using IRISH government bonds. The nature of those bonds is that the IRISH taxpayer will have to pay the banks 1.5% interest each year.

Yes folks, on top of paying (overpaying???) for the assets, and adding something for Long Term Economic Value, we also pay hundreds of millions a year in interest to the banks.

the state is living off day to day borrowing, so of course we have to borrow to buy toxic assets and of course we have to pay interest. The hope is that the interest payments from the performing loans will cover the bond coupon payments. Nobody really expects it to be enough.

Karl Whelan wrote:

That’s the theory anyway. In practice, I suspect the markets will have grave doubts about whether NAMA will break even. More importantly X is going to be a big number and there is simply not likely to be a market for that large a quantity of Irish government bonds all to be sold off at once.[/I]

The ECB has agreed to accept NAMA bonds as collateral. In this way the bonds stay untraded unless the banks default on their ECB borrowings (always possible!). Even after a bank default, it would be the ECB left holding the NAMA bonds - not the wider market.

Karl also mentions the very interesting point that the banks will own 10's of billions of euro in Irish Bonds that they can sell on the open market. The Irish Government will also need to sell 10's of billions of euro.

They can't sell NAMA bonds that they've already mortgaged.

NAMA, the scheme that keeps on taking.

NAMA will not immediately affect the official level of government debt due to its SPV structure. The markets will likely ignore the official number and count government debt as 75bn + 50bn = about 125bn. But this future debt issuance is public knowledge and should be already included in the market price for Irish debt. So I don't think that NAMA will increase government borrowing costs further unless it starts costing more than the markets expect it to cost (15-20bn?).

Also public spending is not under control when we are still overspending by 20bn plus annually.

Unfortunately NAMA pales in comparison with our deficit problem.

daltonr

crocro wrote: »

the state is living off day to day borrowing, so of course we have to borrow to buy toxic assets and of course we have to pay interest.

Yes, but think.
We're borrowing the money for NAMA from the banks that we're bailing out, using only the assets we're buying as security.

Does this sound familiar?
Anglo Golden Circle school of investing.

Except the Golden Circle got to walk away from the debt.

crocro wrote: »

The hope is that the interest payments from the performing loans will cover the bond coupon payments. Nobody really expects it to be enough.

Q. What to you call a developer who has to pay interest?
A. Bankrupt.

Developers are notorious for rolling up interest. Some of the so called "performing" loans that NAMA is buying aren't performing at all, the banks have just been rolling up the interest as originally agreed.

When you push these developers to pay interest what happens?

crocro wrote: »

The ECB has agreed to accept NAMA bonds as collateral.

They can't sell NAMA bonds that they've already mortgaged.

I don't think the plan is for that to happen for all the bonds from day one.

But, you're right, they can't sell the ones they've mortgaged with the ECB, and I don't believe they'll be able to sell the rest at all because they aren't going to be work anything like as much on the open market as the ECB is will to lend against them.

If you were the Irish Banks, wouldn't you just collect 1.5% from the Irish Government, pay 1% to the ECB and pocket the difference?

Forget all about that risky lending crap?

crocro wrote: »

Also public spending is not under control when we are still overspending by 20bn plus annually.

Unfortunately NAMA pales in comparison with our deficit problem.

Indeed, and the problem is that the only effort being made at some sort of recovery is to put all our eggs into getting the property market to grow again.

We're screwed.
Dead Country Walking.

-Rd

OMD

Daltonr. I think you fundamentally misunderstand NAMA. It is not there to make a profit. It may end up doing so but that is not the intention. If it makes a 20% loss that means it would loose in 10 years the equivalent of 6 months current borrowing.

The intention is to get the banks lending money again. Not to fuel property but to fuel business. NAMA may or may not get banks lending more but without NAMA they certainly will not.

oceanclub

OMD wrote: »

The intention is to get the banks lending money again. Not to fuel property but to fuel business.

The previous AIB chief executive let the cat out of the bag by stated that NAMA will make no difference to how much AIB lend to customers:

http://www.finfacts.ie/irishfinancenews/article_1018532.shtml

Sheehy said that after NAMA is enacted, there will be no perceptible difference at AIB branches in terms of lending to customers. Asked what the bank will do with the NAMA bonds, Sheehy said they would go to improve its overall funding position.

If the intention of NAMA is to lend money for business, why is a bank like Anglo Irish, which as far as I can see, only loaned to property developers, covered by it?

P.

daltonr

OMD wrote: »

Daltonr. I think you fundamentally misunderstand NAMA. It is not there to make a profit. It may end up doing so but that is not the intention. If it makes a 20% loss that means it would loose in 10 years the equivalent of 6 months current borrowing.

The intention is to get the banks lending money again. Not to fuel property but to fuel business. NAMA may or may not get banks lending more but without NAMA they certainly will not.

OMD, I think you fundamentally misunderstand my problem with NAMA.

I know it won't make a profit. That isn't my problem.
I know it could make a huge loss. That isn't my problem.

I've said that if NAMA could work I'd support it even if it made a loss.

My problems, just so you're clear are the following:

1. It won't get bank's lending. Since this seems to be the primary goal,
it seems crazy to risk billions on a scheme that won't achieve it, when we could just as easily lend those billions to real businesses.

2. Tax payers are being put at risk while shareholders still have value.
the shareholders in AIB aand BOFI should have been wiped out by now, there is no justification for them not being. And I'm a BofI shareholder, so this isn't selfish taxpayer whinging here.

3. NAMA is being sold as a low risk proposition. The taxpayer is being told it has a good chance of at least breaking even, and any small losses will be recouped from the banks with levies.

This is incorrect. It has no chance of breaking even, the losses will be large, and it's sleight of hand to pump in billions more after NAMA and then claim we're recouping NAMA losses by applying a levy.

If we do apply levies it will only be on Irish banks, putting them at a disadvantage, and if the Irish banks get bought by a foreign bank will the levies apply to them? Probably Not.

4. NAMA can ONLY avoid huge losses if we reinflate the property bubble. So the very scheme that is supposed to save the economy can only avoid losses if we set the economy up for another perhaps greater collapse.

5. We can't afford NAMA.

Those are my problems.

Why am I still a BofI shareholder you might ask?

Because I'm dealing with the Irish Government who are morons and who are determined to bail out the banks. Free Money.

-Rd

Diarmuid

OMD wrote: »

The intention is to get the banks lending money again.

Which is not going to happen, even the banks are admitting that.

fontinalis

daltonr wrote: »

OMD, I think you fundamentally misunderstand my problem with NAMA.

I know it won't make a profit. That isn't my problem.
I know it could make a huge loss. That isn't my problem.

I've said that if NAMA could work I'd support it even if it made a loss.

My problems, just so you're clear are the following:

1. It won't get bank's lending. Since this seems to be the primary goal,
it seems crazy to risk billions on a scheme that won't achieve it, when we could just as easily lend those billions to real businesses.

2. Tax payers are being put at risk while shareholders still have value.
the shareholders in AIB aand BOFI should have been wiped out by now, there is no justification for them not being. And I'm a BofI shareholder, so this isn't selfish taxpayer whinging here.

3. NAMA is being sold as a low risk proposition. The taxpayer is being told it has a good chance of at least breaking even, and any small losses will be recouped from the banks with levies.

This is incorrect. It has no chance of breaking even, the losses will be large, and it's sleight of hand to pump in billions more after NAMA and then claim we're recouping NAMA losses by applying a levy.

If we do apply levies it will only be on Irish banks, putting them at a disadvantage, and if the Irish banks get bought by a foreign bank will the levies apply to them? Probably Not.

4. NAMA can ONLY avoid huge losses if we reinflate the property bubble. So the very scheme that is supposed to save the economy can only avoid losses if we set the economy up for another perhaps greater collapse.

5. We can't afford NAMA.

Those are my problems.

Why am I still a BofI shareholder you might ask?

Because I'm dealing with the Irish Government who are morons and who are determined to bail out the banks. Free Money.

-Rd

That's what I don't like about it, but still I think alot of people equate high house prices with good times and if the bubble re-inflates I honestly think we won't have learned a thing.
When exactly is the NAMA process going to start?

Da GOAT

Diarmuid wrote: »

Which is not going to happen, even the banks are admitting that.

I was talking to my mortgage broker and she told me that the banks wont give out mortgages to anyone who is on contract work. My example, we got mortgage bcoz im in a permanent job while gf wouldnt qual on her own as a teacher. she will be c.i.d. (permanetn teacher after 5 years but cant change school) next year so currently just a one year contract really but likelihood of losing her job is tiny as she has been there almost 5 years.

so to sum up the banks imo are looking to lend less.

The_Conductor

Da GOAT wrote: »

I was talking to my mortgage broker and she told me that the banks wont give out mortgages to anyone who is on contract work. My example, we got mortgage bcoz im in a permanent job while gf wouldnt qual on her own as a teacher. she will be c.i.d. (permanetn teacher after 5 years but cant change school) next year so currently just a one year contract really but likelihood of losing her job is tiny as she has been there almost 5 years.

so to sum up the banks imo are looking to lend less.

Its not even that they are seeking to lend less- under capitalisation rules- they are incapable of lending more- as their liquid assets are at too low levels. This is not going to be helped by NAMA- as the discount will mean their Teir 1 capitalisation ratios are going to take a massive hit. BOI has issued a 5 year bond under the new rules (subject to clarification from the ECB on whether the terms of the Irish guarantee are too generous or not). This will help matters- but people have to accept that the Irish banking industry is a basket case- and is going to remain so for the forseeable future.

mathie

Is it not in the banks best interest to lend?

I don't understand why people say the banks won't lend if it's in their best interest to make money?

Am I missing something?