NAMA is now the biggest danger to property prices...
If one is to take NAMA planners at their word, a wave of commercial property and development land is set to be unleashed into the Irish market, presumably driving up supply and hammering prices downward.
The original idea of NAMA, that it could hoard properties in ways not open to the banks, seems to be subtly changing. Now the agency is talking about developers rapidly reducing their debts via sales of assets and in less than three years.
The obvious question arises, who is going to buy all the land banks that are going to be unleashed and what will the unleashing do to prices?
One view is -- who cares if prices plunge downward, the market needs to find a price floor at some point. That is all very well, but it is the biggest developers who'll be selling first, the smaller ones will come to the fire sale party late and most likely pay the price, literally.
There is also the concern about overspill into the residential market, where prices are in large measure controlled by the supply of land and the price the builder paid for it.
The following sentence from this week's revised NAMA business plan is likely to be pored over by developers and their advisers, but also by anyone else holding commercial property, and even residential property: "Stabilisation or modest reduction of their debt over the medium term is not sufficient."
This seems to imply that debt repayments by developers must be in some way accelerated via quick sales of assets or refinancing of assets.
With the Irish banks, and foreign lenders, scarred from their last dalliance with the Irish commercial property market, it is hard to see where the refinancing is going to come from and even Anglo is being warned off such deals by no less than the EU Commission.
This is not the only strange requirement NAMA is seeking from the developers. The disclosure that all working capital given to developers to finish projects will be charged at 2.5pc over market interest rates is also baffling.
While nobody wants developers given soft loans, this arrangement would seem to simply exacerbate their debt problems, increasing leverage and making repayment even more unlikely.
Then again this may be the point? Either way it appears the instructions from NAMA chief Brendan McDonagh are 'sell up or get closed down'.
So asset sales it will be, but that is problematic too. Unless a huge amount of foreign money pours into Ireland and boosts demand, prices could take a serious lurch downward when the NAMA properties flood onto the market.
For example, Anglo's customers controlled huge land banks in north Dublin and north Wicklow and such concentrations are likely to also press prices downward if developers are forced to sell.
Of course with prices down 50pc already, yields will be attractive to some overseas funds, but they are buying in prime areas, not sniffing around development land in the wasteland areas off the M50.
Yes NAMA has investment property and much of it is in prime locations, but overall only 30 of NAMA's entire portfolio will be finished investment property, the rest will be raw land, hotels, houses/apartments and half-built developments.
To avoid a double-dip price plunge in Irish property, NAMA could of course foreclose on the properties itself and hoard the assets for a longer timeframe than any developer would be allowed.
But this effectively means asset prices are living on borrowed time and extra supply is simply corralled in the wings until NAMA decides to open the sluice gates.
Would foreign money be that comfortable buying into a market with that kind of uncertainty on supply and demand hanging over it?
Report by Emmet Oliver - Irish Independent