2013...is it the year to buy?

D3PO

Villa05 wrote: »

I see your point and to a certain extent the property market is controlled by the Government through NAMA, failure to deal with the mortgage arrears crisis, upward only rents etc. however the IMF are putting pressure on to resolve these issues. The Government is also under pressure to sell assets to pay down debt. Could this result in NAMA being pushed into selling off property.

it should but I dont believe it will. The government are poorly advised by the DOF and a pack of teachers really arent going to make the right decisions without being pushed by the IMF tbh

Zamboni

Skr4wny wrote: »

Now in the post celtic tiger era where I can spend what would've got me a shed back then and get a nice house I see renting as dead money. In the past I did not.

As has been shown by an earlier example in this thread, that is not necessarily the case.
You are only looking at monthly repayment versus rent - Now.
You are not looking at the total potential finance cost of a boom house with tracker versus current house with SVR.

StillWaters

Villa05 wrote: »

I see your point and to a certain extent the property market is controlled by the Government through NAMA, failure to deal with the mortgage arrears crisis, upward only rents etc. however the IMF are putting pressure on to resolve these issues. The Government is also under pressure to sell assets to pay down debt. Could this result in NAMA being pushed into selling off property.

NAMA are selling property. A lot of London property has been sold at profit. I cant see the troika putting pressure on nama to dump their irish stock on a delicate market. It would be economic foolishness in the extreme.

Zamboni

StillWaters wrote: »

NAMA are selling property. A lot of London property has been sold at profit. I cant see the troika putting pressure on nama to dump their irish stock on a delicate market. It would be economic foolishness in the extreme.

Care to elaborate or just make crazy statements and dash?
If Nama genuinely cleared stock at auction it would raise billions for the exchequer through sales receipts, stamp duty and property taxes.
Why not realise the losses rather than ignore them?
Whilst I have no stats, I am sure I am not the only person with deposits in banks in other nations that I would gladly invest in Irish property if the market was allowed to function without interference.
I'd argue the current stalemate is far more negative on Ireland's economy than allowing the market to function, realising losses and getting a true understanding of the countries balance sheet.

Galego

Zamboni wrote: »

Care to elaborate or just make crazy statements and dash?
If Nama genuinely cleared stock at auction it would raise billions for the exchequer through sales receipts, stamp duty and property taxes.
Why not realise the losses rather than ignore them?
Whilst I have no stats, I am sure I am not the only person with deposits in banks in other nations that I would gladly invest in Irish property if the market was allowed to function without interference.
I'd argue the current stalemate is far more negative on Ireland's economy than allowing the market to function, realising losses and getting a true understanding of the countries balance sheet.

I fully agree with your above statement. Although NAMA's intentions may be good, they may be scared of a second bail-out and hiding losses in the balance sheet may be seen by them as the best option for Irish economic. 2013 will certainly be interesting. Last report which I saw stated that NAMA controlled 6,000 properties inside the M50. These are currently sitting emptied or unfinished. They will eventually have to be released and losses written off. They can't hold them for ever thinking that the market is going to recover magically by itself.

kennyb3

http://www.rte.ie/news/2013/0111/average-mortgage-rate-up-5-in-just-three-months-business.html

Average mortgage rate rises 5% in three months - Central Bank

When you take out the trackers i'm sure it's probably double that really. Throw in property tax, no MIR and water rates on the way and it;s definitely going to affect affordability.

StillWaters

Zamboni wrote: »

Care to elaborate or just make crazy statements and dash?.

what did you think was a crazy statement, the fact NAMA are selling overseas property at profit (Battersea Power Station for one, but lots of smaller deals) or the fact I believe they would be foolish to crystalise losses on Irish property?

D3PO

kennyb3 wrote: »

http://www.rte.ie/news/2013/0111/average-mortgage-rate-up-5-in-just-three-months-business.html

Average mortgage rate rises 5% in three months - Central Bank

When you take out the trackers i'm sure it's probably double that really. Throw in property tax, no MIR and water rates on the way and it;s definitely going to affect affordability.

rather than fanning the Indos hyperbole how about representing correctly. Average mortgage interest rate up 0.15% in three months.

that bullcrap headline insinuates something totally different.

nomoreindie

D3PO wrote: »

rather than fanning the Indos hyperbole how about representing correctly. Average mortgage interest rate up 0.15% in three months.

that bullcrap headline insinuates something totally different.

it actually is a 5% rise in interest so the headline is correct

D3PO

nomoreindie wrote: »

it actually is a 5% rise in interest so the headline is correct

no its a 5% raise in mortgage payments due to interest increases. Its a bullcrap headline to make the uneducated think that mortgage rates are up 5%.

goz83

D3PO wrote: »

no its a 5% raise in mortgage payments due to interest increases. Its a bullcrap headline to make the uneducated think that mortgage rates are up 5%.

If the rates went up 5%, at this time, my mortgage would be unsustainable. I'm pleased to +1 you that they haven't gone up 5%.

whatnext

kennyb3 wrote: »

http://www.rte.ie/news/2013/0111/average-mortgage-rate-up-5-in-just-three-months-business.html

Average mortgage rate rises 5% in three months - Central Bank

When you take out the trackers i'm sure it's probably double that really. Throw in property tax, no MIR and water rates on the way and it;s definitely going to affect affordability.

Head line very misleading, the article however state that
"That represents a 5% increase in monthly interest payments."

NB it doesn't say a 5% increase in mortgage repayments, but the headline implied that to me

Glenbhoy

StillWaters wrote: »

NAMA are selling property. A lot of London property has been sold at profit. I cant see the troika putting pressure on nama to dump their irish stock on a delicate market. It would be economic foolishness in the extreme.

How is profit defined?

Profit based on the value attributed to the loan nama took over? Profit for nama is usually a crystalised loss for a bank (which we essentially own, so.....).

SeanSouth

I think (and I hope) that the banks losses were crystallized when Nama "bought" the loans.

When it comes to Nama, I think people get very confused between "Loans" and "property"

Nama bought loans from the banks which were secured on property. The loans were purchased at an approximate 56% discount.

Since then Nama had to foreclose on some of the loans and as a result of that has built up a portfolio of property.

If the property is sold at a higher price than Nama paid for the loans that were secured on them, then Nama has made a profit.

Glenbhoy

Being honest, I can't remember exactly how it was all set up to and what the mechanics are in each part of the process, so if someone could clarify the example below, I'd appreciate it:

Say a developer took out a €100m loan secured on a property.

Nama buys that loan from bank X for €44m and pays with a bond issued by the central bank.

Bank X then removes the asset of €100m from its balance sheet and adds a bond valued at €44m to its balance sheet.

Is the loss of €56m booked there and then - if not, where does it go and who holds that loss?

Then nama takes ownership of the property on which the loan was secured (as the developer defaults). It manages to sell said property for €60m (hopefully not to another company connected with original developer). Therefore nama has made a profit of €16m on its transaction. I guess that €60m goes into the nama bond pot held with the central bank?

Overall the transaction, resulted in a loss of €56m for the bank and a gain of €16m for nama, giving a net loss of €40m.

D3PO

Glenbhoy wrote: »

Being honest, I can't remember exactly how it was all set up to and what the mechanics are in each part of the process, so if someone could clarify the example below, I'd appreciate it:

Say a developer took out a €100m loan secured on a property.

Nama buys that loan from bank X for €44m and pays with a bond issued by the central bank.

Bank X then removes the asset of €100m from its balance sheet and adds a bond valued at €44m to its balance sheet.

Is the loss of €56m booked there and then - if not, where does it go and who holds that loss?

Then nama takes ownership of the property on which the loan was secured (as the developer defaults). It manages to sell said property for €60m (hopefully not to another company connected with original developer). Therefore nama has made a profit of €16m on its transaction. I guess that €60m goes into the nama bond pot held with the central bank?

Overall the transaction, resulted in a loss of €56m for the bank and a gain of €16m for nama, giving a net loss of €40m.

Thanks how it should work yes. I'm not sure it is how it worked though. We would have seen huge losses by the banks if the losses were crystallized this way there and then. I never saw the monster losses that I would expect if this were in fact done

kennyb3

D3PO wrote: »

rather than fanning the Indos hyperbole how about representing correctly. Average mortgage interest rate up 0.15% in three months.

that bullcrap headline insinuates something totally different.

Sorry it was late on a Friday - i should have put some text to accompany it.

The point I was trying to make was about affordability - there's been numerous rate increases over the last year without the ECB rate moving a jot. BOI FTB SRV (as one example) is now 4.3%/4.5% (depending on LTVR). You add in tax increases (prsi, motor tax, property tax etc) and i've really noticed my purchasing power declining. Approximately this time last year I remember being able to borrow at around 3.5% - making a very significant difference over the course of the lifetime of a mortgage.

I really don't think enough emphasis has been put on this. I still wait on the sidelines as i expect there to be very little activity in the first half of 2013 given the number of buyers pulled forward into 2012 by MIR, but more importantly until I see the banks stabilise their lending rates to some degree (and also until the domestic economy starts stabilising or growing again)

jmayo

SeanSouth wrote: »

I think (and I hope) that the banks losses were crystallized when Nama "bought" the loans.

NAMA was high end loans over 5m AFAIK, as in loans with property developers, commerical property, hotels, hospitals, etc.
It didn't touch the normal residential mortgages and it is those losses that have yet to be dealt with AFAIK.
Now money was allocated for these when recapitalisation occurred and when getting funds from ECB, but like everything the picture given by the banks might have been rosier than it really is.

SeanSouth wrote: »

When it comes to Nama, I think people get very confused between "Loans" and "property"

Nama bought loans from the banks which were secured on property. The loans were purchased at an approximate 56% discount.

Since then Nama had to foreclose on some of the loans and as a result of that has built up a portfolio of property.

If the property is sold at a higher price than Nama paid for the loans that were secured on them, then Nama has made a profit.

And some of the loans are performing as they always were and some are complete crud.

Glenbhoy wrote: »

Being honest, I can't remember exactly how it was all set up to and what the mechanics are in each part of the process, so if someone could clarify the example below, I'd appreciate it:

Say a developer took out a €100m loan secured on a property.

Nama buys that loan from bank X for €44m and pays with a bond issued by the central bank.

Bank X then removes the asset of €100m from its balance sheet and adds a bond valued at €44m to its balance sheet.

Is the loss of €56m booked there and then - if not, where does it go and who holds that loss?

Ehh AFAIK those losses were covered in recapitalisation costs, thus we had to fire loads of dosh into the banks.
Now that money came from the ECB, from NTMA.
But in the end of the day the good old taxpayer is on the hook for the money.
So the ones holding the losses are you, me and your kids if you have any. :mad:

Glenbhoy wrote: »

Then nama takes ownership of the property on which the loan was secured (as the developer defaults). It manages to sell said property for €60m (hopefully not to another company connected with original developer). Therefore nama has made a profit of €16m on its transaction. I guess that €60m goes into the nama bond pot held with the central bank?

Overall the transaction, resulted in a loss of €56m for the bank and a gain of €16m for nama, giving a net loss of €40m.

Putting it bluntly all the losses have been covered by the taxpayers.

BTW I like your optimism that NAMA makes a profit.
The only chances of that happening, I would bet, is on property outside of Ireland.

StillWaters

jmayo wrote: »

BTW I like your optimism that NAMA makes a profit.
The only chances of that happening, I would bet, is on property outside of Ireland.

great post jmayo. I think NAMA themselves admitted they are looking to make a profit on their foreign assets (they have some prime London real estate on their books for example), but were no longer forecasting a profit domestically

Glenbhoy

jmayo wrote: »

Ehh AFAIK those losses were covered in recapitalisation costs, thus we had to fire loads of dosh into the banks.
Now that money came from the ECB, from NTMA.
But in the end of the day the good old taxpayer is on the hook for the money.
So the ones holding the losses are you, me and your kids if you have any. :mad:



Putting it bluntly all the losses have been covered by the taxpayers.

BTW I like your optimism that NAMA makes a profit.
The only chances of that happening, I would bet, is on property outside of Ireland.

I'm not sure of that's how it actually happened as I don't recall any banks taking losses of 60BN or whatever. I don't know as I really lost interest in this about 3 yrs ago after it became clear that Lenno was going to railroad this ludicrous plan through regardless, but is the recapitalisation money that we hear about, perhaps funding the bonds that nama used to purchase the properties from the banks?

Re NAMA and profit, it'd be a poor showing if NAMA couldn't turn a profit on some of the assets it bought after obtaining a 60% discount. I do wish Somers would remember that when he's boasting about how well it's performing. It maybe didn't come across in my post, but I was querying how and what nama calls a profit.

Glenbhoy

Had a quick look through aib accounts, they booked 7bn in 2010 and 8bn last year. So the losses appear to have been realised for the most part.

jmayo

Glenbhoy wrote: »

I'm not sure of that's how it actually happened as I don't recall any banks taking losses of 60BN or whatever. I don't know as I really lost interest in this about 3 yrs ago after it became clear that Lenno was going to railroad this ludicrous plan through regardless, but is the recapitalisation money that we hear about, perhaps funding the bonds that nama used to purchase the properties from the banks?

AFAIK the recapitalisation had to be done to the banks even after NAMA had removed a lot of the crud loans.

So even if by some miracle NAMA came out and said it made a profit overall, that is through it's overseas loans and domestic loans (which is the biggest and probably least capable of performing or returning a profit), the taxpayers would still be down because the vast majority of the money poured in through recapitalisation will never be returned to the taxpayers.
Recaptialisation went directly into the banks.

Here is useful layout thanks to http://obsessivemathsfreak.org/stuff/banks/irish_bank_recapitalisation.html

Total Irish Bank recapitalisation (In billions €)

Bank AIB BoI EBS ILP Anglo/INBS Total
Pre 2011 8.1 3.5 - - 34.7 46.3
PCAR 2011 12.7 1.2 - 2.7 - 16.6
Total Recap 62.9
NAMA 2010 8.5 5.4 0.3 - 16 30.2
(Discount%) (54%) (42%)(60%)- (62%)
Recap+NAMA 29.3 10.1 0.3 2.7 50.7 93.1
(ICB/ECB/ELA???) ??? ??? ?? ?? ??!? 148.6??

The main Anglo/INBS recapitalisations came in the form of "Prommissory notes". These have both a principal part, and at the insistence of the ECB and interest bearing portion. Even if the interest was 0%, 30 billion of thee would have to be repaid.
Nama is not considered to either count towards bank recapitalisation or Government debt. I have no idea why.
Discount means the discount percentage/haircut on the Nama loans. This is how much Nama paid of what the loan was "worth" in 2010. House prices in Ireland have fallen by well over 62% since the peak of the boom.
PCAR means the Prudential Capital Assessment Review in March 2011. These were the second big "Stress Tests".
ICB/ECB/ELA means Irish/European Central Bank Emergency Liquidity assistance to banks. No-one really knows how big this is.

Glenbhoy wrote: »

Re NAMA and profit, it'd be a poor showing if NAMA couldn't turn a profit on some of the assets it bought after obtaining a 60% discount. I do wish Somers would remember that when he's boasting about how well it's performing. It maybe didn't come across in my post, but I was querying how and what nama calls a profit.

Oh the foreign loans and foreign property securing them has the best chance of realising value.
Half the stuff in Ireland is probably unsellable and even it is NAMA will probably lose a few percent on the deals and that doesn't even take into account the money they are spending on consultants and the like along the way.

Anyway I think we are going off topic so maybe better to drop this discussion.
Also for our sanity it might help not to talk about it for a while, at least until a fianna failer arrives at your door. :mad: