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Wednesday, 31 August 2011

Empty Hotel Costs Taxpayer €1m A Year!

Taxpayers are forking out more than €1 million per year on bills such as electricity, gas, security and insurance to keep the lights on at the unfinished €170 million Kilternan Hotel and Country Club in Co Dublin.

Irish Nationwide, under former chief executive Michael Fingleton, lent publican Hugh O’Regan €170 million to develop the hotel, but he ran out of money before it was finished. The project went into receivership in 2009.

The receiver’s reports show that, over a 12-month period, the unfinished and empty hotel cost €270,000 to insure, €80,000 in ESB bills, €85,000 in gas bills to heat and €155,000 on security. There was also €200,000 spent on consultants, a further €110,000 on legal fees and €71,000 in receiver fees.

The company filings show that the firm behind the ill-fated development received more than €1 million from the state-owned Irish Nationwide during the period to meet these ongoing costs. Its sole revenue is €30,000 in rental income.

The receiver to Dashaven Ltd, the company behind the project, has been trying to find a buyer for the property, which requires further spending to complete. It is understood that, at the time of the receivership, the property needed around €10 million more to finish it off.

The Kilternan Hotel is just one of several massive projects that were funded by Fingleton’s Irish Nationwide during the boom years but have never been finished.

Details on the ongoing cost of the Kilternan Hotel come in a week where Nama appointed receivers to a British company, funded by Irish Nationwide, to develop and sell Updown Court, a £70 million sprawling mansion in Surrey in England. At present, it too lies empty.

Report by Richard Curran - The Sunday Business Post

Tuesday, 30 August 2011

House Prices To Fall 15%...

Prices could fall by a further 15% if rate of decline continues into next year...

ANALYSIS: Oversupply, the lack of mortgage financing and the cost of borrowing are all playing a part as property prices continue to decline

THE GOOD news on the property market: July’s monthly fall in homes prices was the second smallest this year. The bad news: a single month is not enough to suggest that the deteriorating trend over the course of 2011 has been arrested.

The average monthly fall in prices over the first seven months of this year was 1.4 per cent. The average of the 12 months of 2010 was 0.9 per cent.

The accelerating underlying rate of price declines up to the middle of this year is cause for concern. And delving deeper into yesterday’s figures gives no reason to believe any segment of the market has been immune.

The chart shows declines in prices from January to July ranged from 6-11 per cent. That has added to the already massive declines registered among every market segment since 2007, with apartments now less than half peak prices and most other properties, regardless of location, down at least 39 per cent.

Many factors are likely account for the renewed weakness.

On the supply side, a large stock of unsold homes exists, and there is little sign that inroads are being made into that. According to property website daft.ie, the number of unsold properties up to the second quarter of the year remained stubbornly high, with hardly any reduction over the past three years.

On the demand side, almost every factor is working against price stabilisation. The numbers at work continue to decline and real incomes are stagnating, at best. Yesterday’s figures showing a growing number of people who are unable to service their mortgages are further evidence of these depressing trends.

The lack of new mortgage financing is another factor weighing on the market, with the latest figures to June showing that bank lending for property purchases continues to fall.

The cost of mortgage financing has been yet another factor in putting people off borrowing to buy property, even for those who are in a position to persuade a bank to lend to them.

The European Central Bank’s perplexing decision to increase interest rates twice this year looks like more of a mistake with each passing day. The hikes were justified by an increase in the headline rate of inflation caused by higher commodity prices. But with those increases partially reversed and a real risk of renewed recession, even the inflation hawks of Frankfurt are likely to be dissuaded from further tightening. It is even possible that this year’s increases could be reversed.

If almost all of the drivers of demand are weak, the psychology of buyers in a market in which prices are falling is almost certainly influencing price developments. Any form of deflation tends to feed off itself, with potential buyers postponing their purchases in anticipation of even lower prices.

When will the Irish property market reach bottom, and how low will the low-point be? Given all the dynamics, it is very difficult to see the market stabilising until next year at the earliest. If the current (2011) rate of decline continues for another 12 months, prices would fall by close to 15 per cent from their current level.

Under the central scenario underpinning the EU-IMF bank rescue, a further 21 per cent decline is anticipated before the market hits bottom. Under the worst-case scenario drawn up by legions of foreign consultants, a further 29 per cent decline could take place, bring the cumulative fall from the peak to 59 per cent (it now stands at 43 per cent).

By this metric, there is still some way to go before the bank bailout costs would be pushed up yet again.

Report by DAN O'BRIEN - Irish Times

Mortgage Rescue To Cost You €50,000...

Mortgage rescue deal could cost you up to €50,000...

But it is still only option for thousands.


STRUGGLING homeowners who make deals with lenders to reduce their mortgage payments face paying tens of thousands of euro in extra interest charges.

New figures show that almost 70,000 people have now restructured their mortgages -- mostly by extending the repayment period or switching to 'interest only' payments.

The Irish Independent can reveal that those with a typical €200,000 home loan who extend their mortgage term by just five years face paying €34,000 more in interest charges. And borrowers could end up paying more than €50,000 in extra interest for the same €200,000 mortgage.

The startling figures have been produced by personal finance expert Brendan Burgess. They reveal the huge long-term costs for families seeking to ease the burden.

But the Central Bank, which has been leading the way on policies to ease the mortgage crisis, admitted it had "no figures" on the cost implications for borrowers who restructure their mortgage.

The costs are particularly pertinent since the Government has to come up with a plan to deal with the mortgage crisis by the end of the year under the EU-IMF bailout deal.

But there will be no "debt forgiveness". The solution is likely to focus heavily on "restructuring" mortgage debt.

Those measures are expected to include encouraging banks to offer more flexibility to mortgage customers in difficulty -- by agreeing to suspend payments or allowing borrowers to temporarily make lower payments.

Both of those solutions are likely to add to the ultimate interest costs of the loan since it will take people longer to pay back what they have borrowed.

The banks have to outline the full interest costs of the new mortgage terms when they agree any restructuring.

Documents on most banks' websites acknowledge that extra costs are "likely" or "possible".

A spokesman for the banks' lobby group, the Irish Banking Federation, said: "There's a possibility, if not a probability, that there will be higher interest payments (if you restructure your mortgage).

"It's an important consideration for people to take into account."

Mr Burgess pointed out that while you could end up with higher interest rates over the lifetime of your mortgage, there were benefits to restructuring your loan rather than letting the situation slide.

If you have mortgage arrears, of say €10,000, and agree to have those added on to your main loan, you could end up paying them back over 20 years, piling on higher interest costs.

But at least the €10,000 would not count as arrears anymore. "If you don't have any arrears, the bank can't initiate legal action against you," Mr Burgess said.

Lumping in arrears with a mortgage that carries interest at a rate of perhaps 5pc is cheaper than taking out a personal loan to pay off arrears, since those loans can carry interest rates of more than 12pc.

Homeowners also have the option of reverting to their "old" system of mortgage repayments if their circumstances improve.

This would reduce the long- term impact on interest payments.

And the real cost of any extra interest payments will be lessened, because of inflation. The rising cost of goods and services means €10,000 in the future will be worth less than €10,000 is worth now.

Yesterday's Central Bank data charts the worsening plight of mortgage holders, with almost 56,000 now behind on their payments by more than three months, up from about 50,000 at the start of the year.

The figures include 15,723 cases that are in arrears of more than six months, 7,236 where a formal demand has been issued but no court proceedings have been taken, and 3,027 where court proceedings have been issued.

Repossessions

Just 54 properties were repossessed on foot of court proceedings in the three months to June, while another 119 were repossessed through abandonment and voluntary surrender.

There was some good news for mortgage holders, however, as European Central Bank chief Jean-Claude Trichet offered further hope that interest rates are unlikely to rise soon.

Worries about inflation have typically prompted the ECB to hike rates. Mr Trichet yesterday said he was reviewing inflation risks in Europe with the results ready within weeks.

And if it is judged that inflation is no longer as big a risk, hikes are likely to be put on the back-burner.

Report by Laura Noonan and Siobhan Creaton - Irish Independent

Monday, 29 August 2011

Dublin...Dirty Old Town!

Derelict properties add to Dublin's poor litter rating...

A POOR showing for Dublin city has spoiled the latest anti-litter league which shows the best State-wide results since 2002.

According to the survey, commissioned by Irish Business Against Litter, much of the capital is “as littered as it has been in many years”.

While the State generally achieved the highest level of cleanliness since monitoring by the business group began a decade ago, “derelict and vacant” properties contributed to the capital’s poor showing.

Parts of Cork also fared badly in the survey, with the Knocknaheeny area of the city being placed joint bottom of the league with Dublin’s north inner city.

The survey named individual stores across the State where it said there was excessive litter. These included Tesco in New Ross and Mallow, and McDonald’s, KFC and Pizza Hut in Sligo. Several public buildings were also heavily littered, including Galway’s Merlin Park Hospital.

Sweet wrappers were the most prevalent type of litter, followed by cigarette butts, fast food wrappings, plastic bottles and chewing gum.

The situation is so bad in some areas that Minister for the Environment Phil Hogan has said he will shortly bring in new regulations to give local authorities additional powers to tackle those who litter and dump illegally.

The Minister said he was pleased to note 37 towns and cities achieved the top-rated accolade “clean to European norms”, the highest level of cleanliness nationally in the league’s history.

In all 53 towns and cities were considered and two-thirds of them deemed to be clean to European norms. Among them were the cities of Waterford, Galway and, also for the first time, Cork. Killarney, Kilkenny and Wexford were also deemed clean to European norms. The cleanliness rating for the whole country was the highest since the surveys began.

Tom Cavanagh, chairman of Irish Business Against Litter, said towns were putting in “great effort to show their best sides to tourists to our country” but that tourists typically arrived in Dublin. Before they got to experience Ireland’s overall cleanliness they were first exposed to “widespread litter”, starting at the roads from Dublin airport.

According to An Taisce, which conducted the survey, there was an unprecedented number of seriously littered sites in the capital. It said “the majority of the sites in Dublin were not just littered but suffering from long-term abuse and neglect. Food-related litter was common on most of the approach roads to the city.”

While welcoming the national result, Mr Hogan took issue with the findings in relation to Dublin. He said he did “not accept that the areas chosen for the survey adequately reflect the overall situation on the ground”.

He said: “I regularly walk the streets of our capital and am impressed with how Dublin City Council continues to maintain the city centre. I am aware of the significant effort being put in by the four Dublin local authorities to combat litter in their functional areas, and I am confident that they will continue to strive to improve the situation.”

Mr Hogan said the Derelict Sites Act was being examined by Minister for State Willie Penrose to see how it might be used with ghost estates across the country, and Mr Hogan reminded local authorities it was an instrument they could use.

IBAL ANTI-LITTER LEAGUE RESULTS

CLEAN TO EUROPEAN NORMS: 1 Killarney; 2 Trim; 3 Cavan; 4 Swords; 5 Monaghan; 6 Youghal; 7 Wexford; 8 Ballincollig; 9 Dún Laoghaire; 10 Tramore; 11 Castlebar; 12 Waterford City; 13 Galway City; 14 Kilkenny; 15 Bray; 16 Ennis; 17 Ballina; 18 Cobh; 19 Naas; 20 Longford; 21 Dungarvan; 22 Nenagh; 23 Drogheda; 24 Fermoy; 25 Sligo; 26 Newcastle West; 27 Tuam; 28 Roscommon; 29 Navan; 30 Tullamore; 31 Arklow; 32 Kildare; 33 Dundalk; 34 Tralee; 35 Mullingar; 36 Gorey; 37 Cork City.

MODERATELY LITTERED: 38 Letterkenny; 39 Maynooth; 40 Athlone; 41 Carlow; 42 Tallaght; 43 Limerick City; 44 Portlaoise; 45 Mallow; 46 New Ross.

LITTERED: 47 Clonmel; 48 Wicklow; 49 Tipperary; 50 Dublin Airport environs; 51 Dublin City.

LITTER BLACKSPOTS: 52 Knocknaheeney, Cork; 53 north inner city Dublin.

Report by TIM O'BRIEN - Irish Times

Sunday, 28 August 2011

They Presided Over The Crash...

They presided over the crash -- but no one was ever fired.

An "endemic culture of rewarding failure" in Ireland has meant that not one person in the Department of Finance, the Central Bank or the Financial Regulator's office has been sacked for their role in the worst financial and economic crisis in history.

While their former political masters in Fianna Fail were slaughtered at the polls in February, it has been confirmed to this newspaper this weekend that not a single official or adviser was laid off for their failure either to adequately prepare for the crash, or for their failure to deal swiftly with it when it happened.

"Nobody in the Department of Finance has been fired since January 2008," a spokeswoman told the Sunday Independent.

Friends First chief economist Jim Power said that while many of those who were in key positions during the crash have since moved on or retired, their departure has come at a significant cost to the taxpayer.

"There is an endemic culture here in Ireland of rewarding failure, and it is not restricted to the public sector. Look at Brian Goggin in Bank of Ireland."

Mr Power said the fact that no one has been fired is a damming indictment of how things are done here and the taxpayer always pays to remove underperforming people.

"That no one has been fired is typical of how things are done in Ireland, but there has been a clear-out of those who underperformed. The only thing is they have all been paid off handsomely for stepping down," he said.

Mr Power did say that there seemed to be a move to promote younger promising talent to senior positions within the civil service.

A spokeswoman for the Central Bank and the Financial Regulator said that there has been a significant restructuring of the organisation since 2008.

The present governor, Patrick Honohan, replaced John Hurley while Matthew Elderfield was brought in from Bermuda to replace the widely disgraced regulator Pat Neary. Both Mr Neary and Mr Hurley received substantial pay-offs to depart.

Mr Neary, who retired in 2008, got a massive €630,000 pay-off. This was despite his office having knowledge about the secret directors' loans of up to €129m to ex-Anglo Irish Bank chairman Sean FitzPatrick for at least 11 months.

Under the terms of his contract, Mr Neary will also receive a guaranteed public service pension of almost €143,000 a year, €2,750 per week, for the rest of his life.

Last year, the Department of Finance's top official at the time of the bank guarantee received a pension top-up worth €725,000 in added years on his retirement earlier this year, the Sunday Independent can reveal.

As a result, David Doyle, who stepped down at the age of 60 at the beginning of February 2010, walked away with an initial golden handshake worth almost €600,000 and has seen the value of his pension increased significantly.

His top-up and severance payment are among a number included in a €10.5m pension lump sum payout to top civil servants by all government departments since 2005.

Report by DANIEL McCONNELL - Sunday Independent

Friday, 26 August 2011

Further Losses For Banks...

Morgan Kelly predicts further unforseen losses for banks...

Kelly warns billions owed by small number of big developers


UCD economist Morgan Kelly has predicted that bad debts of a small number of wealthy buy-to-let property investors could lead to previously unforeseen losses for the banks.

Professor Kelly claims this group could cause major problems, even if the overall number of people not repaying home loans does not rise drastically.

However, Prof Kelly, who is renowned for his doom-laden analysis of the housing market, admitted he had no idea how big the resulting losses could be if these 'super-investors' cannot repay their loans.

Prof Kelly, who forecast the original property bust, says in a new academic paper that many wealthy buy-to-let property investors have multiple loans and if they get into trouble that losses will be magnified.

In the paper, published on the UCD website, the economist said there could be as few as 2,000 mortgages of more than €1m taken out by property speculators at the height of the boom, with a combined value of €3bn.

However, Prof Kelly said the biggest 10,000 buy-to-let property investors may owe in the region of €10bn between them.

The analysis is based on Department of the Environment figures that show bigger mortgages taken on during the boom tend to have been interest only, and Prof Kelly said they were more likely to have been used to buy investment properties than to buy homes.

He said around 10,000 investors, often accountants, lawyers and other professionals, spent between €1m and €2m each buying property between 2006 and 2008. These tended to be bought with interest-only mortgages worth around 80pc of the value of the house, he said.

"The extent of losses on these large investor loans are, of course, unknowable at this stage," he said.

Defaults

Prof Kelly admits the findings remain tentative but, if true, they suggest that losses for the banks could rise sharply -- even if the total number of defaults does not -- if the bigger borrowers get into trouble.

The data don't show how many people had more than one mortgage but suggest a small concentration of big debts.

The findings, however, do fit with recent comments from Prof Kelly when he said debt forgiveness for struggling home owners could cost between €5bn and €6bn -- less than previous estimates. That relatively low figure is also based on Prof Kelly's view that home buyers typically have smaller mortgages than property investors.

Last week at an economics seminar, he used that point to argue in favour of a debt forgiveness scheme for home owners unable to cope with their debts -- saying it could be done at a relatively small financial cost.

Report by Donal O'Donovan - Irish Independent

Thursday, 25 August 2011

No Debt Forgiveness...

Government won't write off struggling homeowners' debt...

THE Government is not considering a 'debt-forgiveness' scheme to write off billions of mortgage debt for struggling homeowners, Tanaiste Eamon Gilmore confirmed yesterday.

The comments came as public demand grows for a mass mortgage write-off. One homeowners' group is claiming 60,000 people face losing their homes unless a solution to the mortgage crisis is found.

The clamour follows last week's claim by renowned economist Morgan Kelly that a debt-forgiveness scheme to rescue those in severe difficulty with their mortgages would cost just €5bn or €6bn.

But Mr Gilmore yesterday moved to calm growing expectations that a scheme was imminent, saying the Government was not considering "some kind of blanket write-off or mortgage debt forgiveness, as is being suggested by some".

It is understood that many senior cabinet figures, including Finance Minister Michael Noonan and Public Expenditure Minister Brendan Howlin, have serious reservations about embracing any kind of mass mortgage write-offs.

Subsidising

They are believed to be conscious of how debt forgiveness would be viewed by low-paid workers who have never been in a position to buy a house, and would be effectively subsidising the home ownership of those who are better off.

The Government also has concerns about the cost of a debt-forgiveness scheme, which many estimate at more than twice Mr Kelly's figure.

Mr Gilmore yesterday stressed that the Government was exploring ways to help those having difficulty paying their mortgages and at risk of losing their homes.

The last government extended mortgage interest relief for those who bought when prices were at their highest and extensive work has been done on developing procedures to ensure banks deal fairly with those in arrears. The Central Bank is also engaged with banks on possible new measures to deal with the mortgage crisis.

Report by Laura Noonan - Irish Independent

Wednesday, 24 August 2011

Allsop Space September Auction Catalogue...

Here is the online Catalogue for the latest Allsop Space Auction which takes place on 23rd September 2011 at The Shelbourne Hotel in Dublin.

There are 74 Lots sorted by Lot Number...

Lot Number - Lot Type - Location - Reserve Price:
1 Investment Flat Dublin 1 €90,000
2 Leasehold Flat Co. Dublin €130,000
3 Vacant Flat Blackrock €185,000
4 Vacant Flat Howth €150,000
5 Vacant Flat Galway City €90,000
6 Leasehold Flat Dublin 1 €150,000
7 Leasehold Flat Dublin 8 €74,000
8 Vacant Freehold House Clara €30,000
9 Vacant Leasehold House Renvyle €90,000
10 Vacant Flat Blackrock €240,000
11 Investment Freehold House Loughrea €98,000
12 Vacant Freehold House Lackagh €122,500
13 Vacant Freehold Building Fermoy €300,000
14 Vacant Freehold House Ballyjamesduff €50,000
15 Leasehold Flat Dublin 1 €65,000
16 Investment Flat Dublin 8 €92,000
17 Vacant Freehold Building Gorey €50,000
18 Investment Freehold Building Rathgar €240,000
19 Investment Freehold Building Rathgar €380,000
20 Investment Flat Salthill €90,000
21 Investment Freehold Building Dublin 12 €135,000
22 Vacant Flat Dublin 7 €107,500
23 Vacant Freehold Building Dublin 9 €230,000
24 Investment Freehold Building Wexford Town €290,000
25 Investment Freehold House Abbeyleix €75,000
26 Investment Flat Limerick City €75,000
27 Investment Flat Dublin 8 €92,000
28 Vacant Freehold House Rooskey €50,000
29 Investment Freehold Building Dublin 7 €850,000
30 Leasehold Flat Dublin 1 €80,000
31 Industrial Athlone €50,000
32 Vacant Freehold House Oranmore €55,000
33 Vacant Flat Bundoran €20,000
34 Leasehold Flat Blackrock €240,000
35 Investment Flat Dublin 3 €60,000
36 Investment Freehold Building Rathgar €350,000
37 Investment Freehold House Ballinasloe €45,000
38 Investment Flat Dublin 4 €95,000
39 Vacant Freehold House Limerick City €50,000
40 Vacant Freehold House Mitchelstown €170,000
41 Investment Freehold House Dublin 15 €95,000
42 Investment Freehold Building Gorey €30,000
43 Investment Freehold House Abbeyleix €100,000
44 Leasehold Flat Limerick €37,500
45 Vacant Freehold House Craughwell €130,000
46 Investment Freehold House Portumna €42,000
47 Investment Freehold House Dromod €100,000
48 Investment Flat Dublin 2 €85,000
49 Vacant Freehold House Athlone €50,000
50 Investment Flat Dublin 8 €92,000
51 Investment Flat Monkstown €90,000
52 Investment Freehold House Gorey €65,000
53 Investment Freehold House Abbeyleix €85,000
54 Investment Dublin 1 €225,000
55 Investment Freehold Building Dublin 7 €265,000
56 Investment Flat Dublin 8 €92,000
57 Leasehold Flat Cratloe €75,000
58 Business Kildare €365,000
59 Investment Flat Dublin 15 €80,000
60 Investment Freehold House Gorey €70,000
61 Investment Freehold Building Dublin 8 €425,000
62 Investment Flat Dublin 8 €92,000
63 Land/Site Bullaun €33,000
64 Investment Freehold House Blackrock €275,000
65 Vacant Freehold House Dublin 9 €295,000
66 Investment Freehold Building Dublin 7 €125,000
67 Leasehold Flat Dublin 1 €65,000
68 Investment Freehold Building Bray €375,000
69 Investment Freehold House Blackrock €325,000
70 Leasehold Flat Dublin 2 €120,000
71 Investment Flat Dublin 8 €92,000
72 Investment Freehold House Dublin 8 €80,000
73 Investment Freehold House Dublin 15 €130,000
74 Investment Flat Dublin 15 €55,000

Auction Date:

23rd September 2011 Venue:
The Shelbourne Hotel
Dublin 2
Allsop Space Contact Info:
Ireland office +353 (0)1 676 2033
Uk office +44 (0)20 7494 3686






Tuesday, 23 August 2011

Allsop Space Next Auction...

New property fire sale next month...

Two period houses in Rathgar and a six-bedroom house on one of the leafiest roads on Dublin’s northside are likely to be among the most sought after properties going under the hammer at the Allsop/Space auction next month.

The auction of distressed properties, the third to take place in Dublin since April, will be held in the Shelbourne Hotel on Friday September 23rd. There will be 74 residential and commercial properties across the country on offer.

The two Rathgar houses are currently split into flats. One of the houses will have a reserve which will not exceed €240,000 while a neighbouring house has had its maximum reserve set at €380,000. At the height of the boom, houses on the road were routinely priced at over €1.5 million.

A six-bedroom, three-storey house on Alphonsus Road in Drumcondra has a reserve which will not to exceed €295,000. It is located not far from an Iona Road property which proved to be the most sought after lot in the July auction.

Seven recently-built apartments on Francis Street in Dublin 8 have will have reserves not exceeding €92,000, while three student village units in Cratloe Wood Student Village in Limerick are being sold as one lot with a reserve of €75,000.

Five properties in Blackrock’s Meadow Court development are up for auction, including two townhouses and three apartments with reserves not exceeding €185,000 and €325,000.

The most expensive lot is 64/65 Prussia Street in Dublin 7. The lot features an entire development of 14 apartments and 4 commercial units with a current rent roll of over €110,000 per annum and potential for more. The reserve will be no greater than €850,000.

Other unusual and attractive lots include a house in the Old Coastguard Station in the popular Renvyle area in Galway with a reserve of €90,000 and a riverside period house in need of work with a private jetty in Rooskey, Co Leitrim, which has a reserve of €50,000.

“We expect a similar level of interest - despite some media reports of lower numbers at the July auction, the Shelbourne Hotel clicked in an equal number of people to that of the April auction, hence we expect equal interest at our September auction,” Stephen McCarthy of Space Auctioneers said.

Gary Murphy of Allsop said he was confident that the next auction would be “equally as successful” as the first two “having firmly established that there is still an appetite for property in Ireland at the right price.

The July auction realized €16.3 million and 95 per cent of the properties were sold. The properties went for an average of 34 per cent more than their reserve. Some 9 per cent of the purchasers were from overseas.

Report by CONOR POPE - Irish Times

Monday, 22 August 2011

Leaders Handled Economy Like Intoxicated Joyriders...

Ahern and Cowen handled the Irish economy like 'intoxicated joyriders'...

FORMER Taoisigh Bertie Ahern and Brian Cowen handled the Irish economy like "intoxicated joyriders" before it collapsed, a leading academic has said.

Dr Ed Walsh, the University of Limerick's founding president, also launched a blistering broadside against the public sector as he delivered the annual Michael Collins oration at Beal na mBlath in Co Cork.

He described it as "flabby and over-paid" as well as "antiquated and dysfunctional".

And Dr Walsh said that the current Government had to reverse a ludicrous situation whereby Ireland had allowed its basic jobseekers' allowance to be greater than the average industrial wage of most EU accession states.

"The crisis that is convulsing Europe has its origins in the partisan management of the euro currency from the outset. Sustained low interest rates to facilitate a dominant Germany in the process of reunification were exactly what the overheated economies of Ireland and many other countries did not need," he said.

He added: "(Bertie) Ahern, (Charlie) McCreevy and (Brian) Cowen, with the economic insights of intoxicated joyriders, made no attempt to counteract this; but perversely poured fuel on the flames by incentivising speculative building and borrowing."

Unlike Denmark, Sweden and the UK, Ireland joined the euro and lost control of its interest and currency-exchange rates -- and also opened the economy to a wave of cheap credit that had disastrous consequences, the academic said.

Dr Walsh warned that Ireland now had no choice but to lower the standard of living, balance the national budget and try to negotiate concessions to the "harsh and unfair terms imposed by the EU". He laid the blame on successive governments who, for electoral gain, undermined the fundamentals of the economy.

"They permitted uncontrolled expansion of the public sector, doubling the cost to the taxpayer. They dislocated central government by attempting to dispatch parts of it to favoured regional constituencies.

"They eroded the tax base, appointed people of doubtful competence to public bodies, and ceded control in key areas to social partnership -- resulting in public-sector wages rising to the highest levels in the EU," he said.

The consequence, Dr Walsh said, was Ireland was now on its knees just 11 years after it was ranked the fourth-most competitive economy in the world.

He added that, without a fair and restructured eurozone deal, Ireland would inevitably slide into default.

report by Ralph Riegel - Irish Independent

Friday, 19 August 2011

€6bn For Mortgage Forgiveness...

Mortgage forgiveness 'would cost €6bn'...

A debt forgiveness scheme to relieve homeowners in mortgage distress would cost “in the region of €5-€6 billion”, UCD professor of economics Morgan Kelly has said.

In a keynote address to the Irish Society of New Economists in Dublin yesterday, Prof Kelly delivered what he described as some “good news”.

“We are talking sums in the region of €5 billion to €6 billion which would be necessary to spend on mortgage forgiveness, which by our standards are not very large,” he said.

“This sum to sort out tens of thousands of people with big problems does not seem enormous.”

Prof Kelly, who has been praised for forecasting the property crash, has also provoked sharp criticism from some commentators for his analysis of the recession.

“The good news is that if you leave investment mortgages out [of total mortgages owed], which are largely the banks’ problem, and look at mortgages people have on their own houses, there are about €55 billion of these out there,” he said.

“A lot of people can’t repay these mortgages and this is causing people terrible agony,” he said.

Prof Kelly made his estimations based on 20 per cent of people having difficulty paying their mortgages. This was the default figure in Florida where there was a similar housing bubble, he said. He estimated that mortgages would need to be halved on average.

“ I would reckon that the ultimate cost of this very useful social programme is something in the region of €5 billion to €6 billion.”

In such a scheme mortgages would be reduced to a level “deemed affordable” while others would be allowed to leave their properties “without being pursued for outstanding debts”, he said.

Prof Kelly outlined factors which could make it difficult for banks to recover mortgages including resistance from articulate middle class homeowners and Irelands “paramiliary tradition of agrarian violence”.

He described as “ridiculous” the situation in which banks “have amounts set aside in their accounts for their mortgage losses but are not forgiving mortgages”. This was “something that needs to change”.

Prof Kelly said any debt forgiveness scheme would have to take account of adverse selection and moral hazard.

Debt forgiveness has been rejected as a solution to the problem by some experts. Financial Regulator Matthew Elderfield said last year there was “no silver bullet solution” for mortgage arrears due to “moral hazard” and we “must be careful that any approach doesn’t provide financial incentives for the arrears problem to get worse”.

Report by GENEVIEVE CARBERY - Irish Times

Thursday, 18 August 2011

Cost of Properties For Students...

COUNTRY buyers with cash in their pockets have been trawling Dublin for homes for their college-bound children in the past few weeks – and many will be closing on deals next week, when CAO offers come out.

But with the property market in the state it’s in, there’s a lot on offer that could interest investors, ranging from a city centre two-bedroom apartment in the appropriately named College Gate development near Trinity for €190,000 to an eight-bedroom guest-house in Ranelagh for €735,000.

Buying a house or apartment to house one or more third-level offspring is cheaper than paying rents – if you don’t have to borrow – especially as prices continue to fall in the city while rents have stabilised, according to the latest Daft report.

However, Moneycoach.ie’s Frank Conway sounds a cautionary note about investing in property for your student children: if you don’t have the cash to pay for it “the chances of securing finance is very, very low” he says.

“This will rule the majority of people out of this option. For those that can either secure financing or have the cash to purchase, again, they need to do so on a long-term basis. A four-year college course comes to an end quickly, their student may decide college is not for them and take off to another city . . .”

However, for those with cash, three and four-bedroom houses are popular says Martin Doyle, of Sherry FitzGerald’s Drumcondra office, which deals in properties close to DCU and on cross town bus routes. “Parents will buy for their first child at college and rent the extra rooms to other students until younger children move to Dublin.” It’s a long-standing tradition and one that hasn’t changed much with the downturn, according to agents.

Southside properties currently on the market include 86 Roebuck Castle, Clonskeagh, Dublin 14, a three-bedroom terraced house: it would be very handy for anyone attending UCD as it’s just behind the Belfield campus. It’s for sale through Douglas Newman Good.

A student going to Trinity College, Dublin, couldn’t get much closer than 38 College Gate, Townsend Street, Dublin 2. This is a third floor apartment with two double bedrooms for sale through Felicity Fox for €190,000. It’s a few minutes’ walk to Trinity, in walking distance of DIT and close to buses for UCD or DCU.

Most parents are looking for houses or apartments at the lower-priced end of the market according to Fiona Gilsenan at Felicity Fox. But an ambitious parent/investor with a lot of spare cash might find Tavistock, 64 Ranelagh Road, Dublin 6, an interesting proposition: this eight-bedroom semi-detached Victorian redbrick – for sale through Savills for €735,000 – is currently a guest-house, so all bedrooms are en suite.

Near the junction of Ranelagh Road and Northbrook Road, it’s a reasonable walk/cycle/bus ride into Dublin city centre, not too far from UCD as well as being close to a Luas stop.

On the northside, there’s a house in Gaeltacht Park that’s a short walk to DCU: 15 Innishmaan Road, Whitehall, Dublin 9 is a four-bedroom house for sale for €335,000 fpr sale through Property Team Lappin.

And 17 St Pappin’s Road, Glasnevin, Dublin 11, is a three-bedroom end-of-terrace house very close to DCU. It is for sale throughSherry FitzGerald for €279,000.

Families willing to wait a few weeks mioght get a good deal at one of the distressed property auctions that are becoming a regular feature of the market. Allsop/Space expects to have over 100 properties in its September 23rd auction.

Agent Stephen McCarthy says it will have a number of one and two-bedroom apartments in Dublin’s inner city – e.g., Smithfield, Cork Street and Francis Street – with guides from €100,000 to €150,000 in the auction. In its last property auction, e.g., a single investor paid €250,000 for five apartments near Tallaght IT.

Report by FRANCES O'ROURKE - Irish Times

Rental Property Prices To Fall...

Glut of properties drives down rents.

RENTAL prices are set to fall in the coming months after a glut of extra properties were put on the market.

New figures showed that the number of properties available to rent has shot up by a third since May.

Overall rent levels across the country have not moved for a year, but economists predict they may fall in the coming months because of the greater number of properties on the market.

The average monthly rent for a house or apartment is €823, a new Daft.ie survey showed.

Rents fell by a quarter at the start of 2007, but have since stabilised and are not changing from one month to the next.

Owners reacted to rents remaining static by putting more vacant properties into the rental market, Daft.ie economist Ronan Lyons said.

The figures came as the scramble for third-level students to find accommodation begins.

The total number of properties available to rent in Ireland's five major cities rose from 6,000 in May to 8,000 at the start of August, Mr Lyons said.

The increase in supply was more pronounced in Dublin where, after rising strongly for six months, rents stabilised in the last three months.

Rents for double rooms have fallen by up to 3pc in many parts of the country, but rose sharply in Limerick city and in Letterkenny.

The average cost for a double room in Dublin city centre is €485, which was about twice the cost of renting in towns like Castlebar and Letterkenny, at €235.

Rental prices in Dublin, Cork, Galway and Limerick cities are all higher than they were this time last year -- even though rents across the country as a whole have not changed.

Welfare officer with UCD students' union Rachel Breslin advised students to get together when renting a property.

"It is, on the whole, more economical to group and rent a property together."

Report by Charlie Weston - Irish Independent

Wednesday, 17 August 2011

Mortgage Recovery Years Away...

IT could be years before the mortgage market recovers, economists said yesterday.

They were reacting to new figures that showed just a trickle of new home loans were issued between April and June.

Mortgage lending has seized up, with just 3,550 new mortgages granted in April, May and June.

This is half the number issued in the same quarter a year ago, and a fraction of the 41,000 issued in the same three-month period in 2007, figures from the Irish Banking Federation show.

Housing economist David Duffy, of the Economic and Social Research Institute (ESRI), said the mortgage market is unlikely to recover until consumers had some certainty about the financial hit they are set to take in December's Budget.

"We are looking at a fairly weak market this year and next year unless something big happens which can bring about certainty," Dr Duffy said.

Uncertainty around the global economy is also holding back buyers from committing to a massive purchase like a house.

Dermot O'Leary, an economist with Goodbody Stockbrokers, said the fact that there were between 100,000 and 140,000 vacant housing units in the market meant prices were due to keep falling.

It could be a number of years before the housing and mortgage markets recover, Mr O'Leary said.

Brokers insisted that the collapse in mortgage lending is largely due to banks being reluctant to lend. Director of Irish Mortgage Brokers, Karl Deeter, said banks were approving people in principle for loans but when it came to the crunch they found a reason not to lend.

But head of the Irish Banking Federation, Pat Farrell, insisted there was no demand for mortgages. He said would-be buyers were holding back because of fears about job losses, falling property prices and weak consumer sentiment.

He said lenders were being prudent by only approving mortgages for those who have the capacity to repay.

"Current activity reflects the general macroeconomic environment. In these challenging times, manageable borrowing and prudent lending are to be expected," he said.

The figures show that for the first time since 2005 someone buying their first home or moving to a larger house is now borrowing less than €200,000.

Report by Charlie Weston - Irish Independent

Monday, 15 August 2011

Austerity Inspiration...

Real austerity brings inclusivity, inspiration and invention...

CULTURE SHOCK: The Cultúrlann in Derry has been shortlisted for the architectural Oscars, the Stirling Prize. With its modest design, it shows good aesthetics make for good politics.

Photo - Irish Times

MODESTY AND restraint are not the virtues one associates with Irish culture in the Celtic Tiger years. But one of the finest pieces of contemporary Irish design is brilliant in part because it is contained, understated, and so supremely self-confident that it doesn’t have to shout. John Tuomey and Sheila O’Donnell’s Cultúrlann building in Derry is on the shortlist for the architectural Oscars, the Stirling Prize. I was in it for the first time last weekend and it deserves all the praise and prizes it can get. Apart from its own merits, it points towards a kind of genuine austerity aesthetic, a way for Irish art to be modest and serious without being dull and impoverished.

The Cultúrlann is the baby of the Stirling shortlist, up against far more opulent projects. Most of the other buildings cost vast amounts of money. The former British Telecoms building in London was refurbished at a cost of £72 million. The refit of the Royal Shakespeare theatre in Stratford cost £60 million. The admittedly stunning Olympic Velodrome in London, which is widely tipped to win, cost around £93 million.

The Cultúrlann cost just £4 million. But it is a wonderful contemporary validation of Mies van der Rohe’s architectural dictum that less is more.

What seems to me to give the building its power is that it emerges, not out of the sense of amplitude that characterised pre-crash Ireland, but out of scarcity – of money and space. It’s interesting, indeed, that the Cultúrlann shares with another brilliant public cultural building of the last few years, the new opera house in Wexford, the condition of being a solution to a very difficult problem. The Wexford theatre had to be inserted into a limited site on a mediaeval street, without bullying the neighbouring buildings.

The Cultúrlann was an even more constrained project, built on Great James Street in the old walled city. It had to fit into the site of a burnt-out bakery, on a street of Victorian and Georgian terraced houses. To make matters worse, an electricity substation occupies a third of the site’s street frontage and had to be incorporated in the façade. And there is only one entrance to the site – there’s no view from the back of the building.

In fact, you could easily walk by the building without taking a second look. The outside is wedged between existing buildings, respects the height of the street and is conspicuously inconspicuous. If you do stop and look, you’ll notice the clever way the façade is actually arranged to look smaller than it is, folding in and out, almost like corrugated cardboard. The grey concrete exterior is broken by angular arrangements of yellow-framed windows, so that no one thing presents itself to the eye with any great force. There’s nothing imposing about the way the building sits on the street.

The genius of the design, though, is that O’Donnell and Twomey compensated for this modesty with a lovely paradox – placing the facades on the inside.

You go in to what feels an outside space: O’Donnell and Tuomey describe it as “an outside room”, and that’s the way you experience it. The Stirling judges compare the vortex-like atrium to a “twisting mediaeval lane in an old city”. For once, this isn’t poncy architect-speak. The interior really does feel like a street. With the natural light streaming down from the big, sloping glass roof, the space has the feel of a dreamy little enclave of an idealised city. It’s not just because there’s a shop, a cafe and a bar. It’s the way they’re arranged in a space that manages to seem at once geometric and haphazard.

But there’s nothing mediaeval about the design itself. Giving the role of the Cultúrlann as a centre for the Irish language and music, it would have been tempting to create an archaic, self-consciously “traditional” space, using some imagined vernacular style. Instead, O’Donnell and Tuomey have gone for something that it relentlessly contemporary. It might even be an industrial building. The walls are concrete, softened by being marked with boards. The floor is grey terrazzo. There’s a dreamy blue wall at the end of the atrium but the dominant colours are the yellow of the window frames that’s the colour of industrial cranes and the red steel, used for the stairs, that reminds you of gantries.

But this toughness is never brutal. The four levels of the building are twisted playfully around the trapezoidal central space, so that you see stairs, bridges and platforms moving mysteriously at different angles, upwards towards the light. You’re invited to look up, making the building feel much bigger than it is. But you’re also invited to go up – the space asks to be explored.

This emphasises the nature of the building as a community centre. It is beautiful, highly formed and sculptural, but it is not intimidating. On the contrary, everything about it tries to draw people in. And in this sense, the good aesthetics also make for good politics. The Cultúrlann is the first publically-funded Irish-language centre in the UK. It is part of a city that has been notoriously divided – physically and psychologically. The minimalism of the design and the open nature of the space – its feeling of being as public as a street and therefore common property – are not just matters of style. They convey neutrality and inclusivity.

But there’s another kind of political statement here too. This is a great public building that is entirely without pomposity or grandiloquence. It has a genuine austerity, not just in the way it uses cheap materials like plywood and painted plaster in many of its rooms, but in the way it makes the most of every resource of space and light that’s available to it. This kind of austerity isn’t grim, slash-and-burn negativity. It’s the creativity of turning constraints into inspirations and limitations into inventions.

Report by FINTAN O'TOOLE - Irish Times

Sunday, 14 August 2011

House Prices Could Fall 67%...

House prices ‘could fall by 67% from peak’...

INTERNATIONAL credit ratings agency, Fitch Ratings has warned of "further downside risks" to Irish house prices; adding that prices could ultimately fall by 67% from peak levels in a worst-case scenario.

In a new report on the Irish housing market, Fitch said it realistically expects prices to show a total drop of 50% from their peak around four years ago. However, it added that while that rate of decline forms "the most likely scenario", a worst-case scenario would result in a full-term 67% drop in house prices.

"Irish house prices continued declining during 2010 and now are approximately 42% below the peak.

"In light of the oversupply of properties and continued restricted credit availability, the agency sees further downside risks to Irish house prices and as a result, Fitch now expects a peak-to-trough house price decline of approximately 50% as the most likely scenario," said Ketan Thaker, senior director in Fitch’s European Structured Finance team. Fitch said it has pushed an expected rebound back to next year.

"Interest rates are also expected to rise before a full economic recovery, which would result in affordability stress for the majority of borrowers in the Irish market," it warned further.

Fitch is also warning of a potential increase in "foreclosure frequency" — or house repossessions — here, reflecting "the deterioration of the Irish economy and the heightened sovereign risk and its impact on mortgage performance."

"The Irish economy has experienced unprecedented stress, which has knocked 12% off real GDP over a three-year period and increased the unemployment rate by 9% over the same time. Combined with a sharp house price correction, Fitch’s revision to its Irish mortgage-loss criteria reflects the stress in the Irish economy," said the agency’s Michael Greaney.

"Almost all the mortgage debt in the Irish market either starts off floating or becomes floating-rate during the term of the mortgage. The low interest rate environment, over the past two years, has significantly reduced the debt service burden for many borrowers. With the ECB recently starting to raise interest rates, these borrowers are likely to be exposed to higher debt service burdens," the report added.

Property agency Savills said it broadly agreed with the Fitch forecasts.

"The pace of price falls totally depend on locations, however," according to Joan Henry, head of research at Savills Ireland.

"In prime locations, house prices are showing signs of bottoming out at between 50% and 55% from their peak. But in commuter areas, where there may be an oversupply of housing, prices are likely to bottom out at between 60% and 67% below peak.

"There’ll still be demand problems in areas of oversupply," she added.

Report by Geoff Percival - Irish Examiner

Tuesday, 9 August 2011

A Bankrupt Ireland...

Economist reveals appalling vista of bankrupt and beleaguered Republic...

THE EURO ZONE debt crisis will be solved “eventually” as it is to Germany’s benefit to remain in the euro, UCD economist Morgan Kelly has said.

Delivering the Hubert Butler Lecture at the Kilkenny Arts Festival on Saturday, Kelly predicted very large European Central Bank loans to Ireland, Spain and Italy. Even if the Republic were to receive favourable terms, “deep problems in Ireland remain”, he added.

In an hour-long address, Kelly also predicted that Irish debt will approach €250 billion by 2015, €50 billion more than Coalition estimates, and has said there was “no way we can repay that”.

He also warned that the losses in the Irish banks would be much greater than predicted, reaching €100 billion rather than the €60 billion estimated.

The academic, who has been praised widely for forecasting the depth of the recession, has recently warned of an impending mortgage default crisis and on Saturday described “ghost estates, empty retail parks in Longford and land banks around Carrick on Shannon” as “more or less worthless”.

The mortgages of particular worry were interest only mortgages given out to “lawyers, solicitors and estate agents at the peak of the bubble”, he added.

Estimating 10,000 such loans were advanced on properties worth €1.1 million each, Kelly said “that is €11 billion in loans to these high rollers most of whom couldn’t buy you a cup of coffee now”.

He said that while prices have fallen by 50 per cent, with “almost no transactions taking place at that price” and with unsold properties starting to accumulate, we are far from the bottom of the market.

He said the next problem the banks will face would be organised opposition to repayment with the possibility of some Michael Davitt-type figure emerging, or a risk of “paramilitary intervention”.

With Irish banks unable to be sold, Kelly said they will become loss-making, gold-plated, semi-States.

But he warned that with politically appointed bank boards able to decide who gets relief on their mortgage and who gets their mortgage written off, “this opens up vistas of patronage that Charlie Haughey wouldn’t even have been able to dream of”.

POLITICS AND PATRONAGE

Discussing the State’s economic and political history, Kelly said that while Irish incomes had been above the western European average at the time of independence, by the mid-1980s they had fallen to half of that – a “dismal performance only maintained by mass emigration”.

By the 1990s, however, he argued that income levels had risen to the European average and unemployment was disappearing, an overnight miracle that could be traced back to free secondary education, the expansion of universities and increased competitiveness.

Describing the boom of the 1990s as an extraordinarily beneficial period for Irish society, he said the only group not to benefit were politicians. “In the past, how they operated was direct patronage for jobs and being moved up local authority housing lists” but the problem for politicians in the 1990s was people suddenly had jobs.

“Before it was, ‘oh, I might be able to get your son a job in the post office’. That didn’t matter now because he had a job in Dell.”

UNCONTROLLED GROWTH

Kelly said that as competitiveness slowed in the late 1990s a decline to ordinary European growth levels of 2 to 3 per cent a year might have been expected. Instead, he said, “we continued to grow by 6 to 8 per cent a year”, driven by property.

He said that while “usually you get about 5 per cent of your national income from building houses, by the mid-2000s this had risen to 15 per cent,” in the Republic.

Noting that by 2007, we were building half as many houses as Britain which is 15 times our size, he said the building boom was caused by rising house prices with the average Dublin home costing, 15 times the average industrial wage.

“Bank lending more than tripled in about six years and everything that happened flowed from that.”

With lending incentivised by bonuses, “as the banks couldn’t find enough people to borrow from them”, they found a new market in property developers, a move he said that was pioneered by Anglo Irish with AIB and Bank of Ireland foolishly following suit.

Describing the culture of development as a big boon for Irish politicians, he said planning laws were simply a means of ensuring baksheesh [bribes] for local politicians, where the rule which applied was: “You can build anything, anywhere so long as you pay the right amount to the right people.”

VESTED INTERESTS

With a decline in the numbers taking out mortgages by 2006, Kelly said the banks had started to run into problems a lot earlier than people think.

Noting that while bank economists predicting a soft landing were “pushed out by their employers to tell you people to keep buying houses, stuff wasn’t getting sold so developers had started to run into trouble”.

Assigning responsibility for the property boom, he said “it was the senior management in the Irish banks; in particular AIB and Bank of Ireland”.

“They could have gone to the government and said, ‘Anglo are out of control, you need to stop them.’ Instead, they imitated Anglo and tried to poach developers from Anglo.”

BANK GUARANTEE

Kelly described the bank guarantee that followed as “Cowen and Lenihan’s idea of shock and awe” which, designed to frighten speculators, instead turned out to be “shocking and awful”.

He said the real mistake, however, was not establishing the guarantee, but in sticking with it. Describing governor of the Central Bank Patrick Honohan as the government’s “chief economic adviser”, he said “he could have walked away from it . . . but he said no, the losses were manageable”.

Referring to the subsequent EU-IMF bailout, Kelly said while Honohan and the government might have expected easy terms for being “good kids”, instead the European Union made an example of us.

He said Ireland was now a sort of “EU protectorate”.

EDUCATION STANDARDS

Listing excessive personal debt, unemployment – particularly among young men – the closure of indigenous businesses and the international economy, Kelly said the only solution was to have a better-educated workforce than everybody else.

But he warned that the low ranking of Irish students on maths skills against their Organisation for Economic Co-operation and Development counterparts was not a statistical blip.

Referring to his own teaching experience, the economics professor said “we have dumbed-down our education system and unfortunately the rest of the world hasn’t”.

In conclusion, he recalled the economic crises in the 1950s and 1980s: “It seems that every 30 years we go and destroy ourselves.”

The Republic’s problem was “not so much a tolerance of corruption as an understanding of human frailty . . . a reluctance to cast the first stone”.

He said the alternative is that we toughen up. “We have to be better educated . . . intolerant of corruption and fighting all the time to stay one step ahead. The choice is ours and we are going to be facing it soon.”

Report by JOANNE HUNT - Irish Times

Monday, 8 August 2011

NAMA Secret Art Auctions...

Nama declines to issue list of art collections to be auctioned...

A NUMBER of valuable artworks seized by the National Asset Management Agency from property developers are to be put up for auction in the coming months.

However, Nama has declined to provide a list of the art collections it has acquired, saying only that it was “keenly interested in getting best prices for the works”.

Last month, the agency published a list of assets it had for sale but it made no reference at that time to the various art collections seized from developers who own billions to the banks.

While the agency will not name the individuals involved, it has already seized the art collection of Derek Quinlan – a former tax inspector turned property speculator, and resident of Shrewsbury Road, Dublin 4 – who moved to Switzerland in 2009.

It is expected other collections assembled during the boom will come under Nama’s control in the months and years ahead as the assets of other developers and companies are taken into public ownership.

Some of the art is hanging in private homes while some is in hotels and office buildings.

In a statement, Nama said it “currently has possession of a number of paintings which are being stored securely”, and “plans to offer these for sale through the international art market auctions in the coming months”.

While the agency would not disclose details of the artworks, it said it had “sought proposals from several fine art auction houses” and expects that “the works will be disposed of in the autumn-winter fine art sales”.

The proceeds would be used to “offset outstanding loans owed to the agency by the relevant debtor”. The agency also added: “As with all assets, Nama is keenly interested in getting best prices for the works and best value from the auction house and these will form part of the criteria used to select the auction house to which the works will be consigned”.

An authoritative art trade source, who did not wish to be named, believed the valuation and sale of the paintings should be put out to public tender, pointing out that “normally in State and semi-State business a tendering process is mandatory”.

He described the procedure as “not a very transparent way to dispose of assets”.

The decision by Nama is awaited with interest by all the main Irish fine art auctioneers and also by the “big three” international players – Sotheby’s, Christie’s and Bonhams who each have a representative in Ireland.

Two paintings from Mr Quinlan’s collection have been acquired by the National Gallery of Ireland. One, Sir John Lavery’s Return From Market – valued at €300,000 – was given as a “gift” from Nama to the nation; and a second, National Airs/ Patriotic Airs by Jack B Yeats – for which the gallery paid Nama €175,000. Nama said: “The Yeats was professionally valued by an independent expert” following a “competitive process”.

The National Gallery is not planning to acquire any more of Mr Quinlan’s collection – thought to number a dozen paintings some by household name artists such as Paul Henry, Roderic O’Conor and Andy Warhol. The collection was worth an estimated €5 million but is estimated to have fallen in value by at least 50 per cent.

Report by MICHAEL PARSONS - Irish Times

Sunday, 7 August 2011

Ireland Should Leave Eurozone...

Austerity has failed, eurozone on brink...

Expert calls for Euro cord to be cut as world financial crisis rages.


MINISTER for Finance, Michael Noonan, yesterday sought to 'spin' what he called "positive developments for Ireland" arising out of the greatest financial crisis in the history of the world.

But as the minister, who insists he is "most definitely not on holiday", tried to present an upside for Ireland to the global disaster, the austerity policies embraced by the Government, and Europe have been deemed an absolute failure.

"They simply aren't working," one expert said.

Professor Ray Kinsella also said that Ireland should now withdraw from the eurozone -- which many political and financial analysts worldwide believe to be at "serious risk" of collapse.

These experts also say that the only alternative to a eurozone break-up is closer fiscal union which, they predict, will herald even more severe austerity measures.

The more the crisis develops, the more it has become evident that there has been a failure of political leadership at the heart of Europe and worldwide.

Last night, UCD professor Morgan Kelly predicted that Ireland's debt will reach €240-€250bn by 2015 - compared to the Government estimate of €200bn.

The main reasons for the escalating debt mountain is the losses of the Irish banks, which he estimates at up to €100bn.

In a comment which reflects the view of citizens in Ireland and Europe, former Italian Prime Minister, Romano Prodi has said: "We don't know who is in charge."

Professor Kinsella of the Michael Smurfit Graduate School of Business said: "The economic forecasts on which Ireland's budgetary policies -- and the bailout -- have been constructed have now been shown to be wholly wrong.

"So, too, have the policies. They simply aren't working. All there is to show for the sacrifices are a sovereign debt rating of junk status, a shrinkage of employment of 15 per cent and 'closed' and 'for sale' notices across the country.

"This is not leadership -- it borders on the wilful to adhere to policies that are demonstrably not working and that have mired the eurozone in a crisis from which it is seemingly incapable of escaping. Ireland needs to leave."

Mr Noonan, however, who is in Limerick this weekend, remains intent to focus on what he sees as the positives -- even as it became evident yesterday that the global financial markets will re-open on Monday to a changed reality.

Standard & Poor's downgraded the US credit rating by one notch on Friday.

The US rate was cut from from triple A to double A plus -- a move which was deemed unthinkable just weeks ago.

While the US downgrade may have been factored, to an extent, into events which caused carnage on the financial markets last week, the fact that it has now happened is likely to cause further investor flight this week from equity markets to perceived safe havens, such as hedge funds and gold, which pay no dividends.

Some of the immediate impact may be forestalled, however, only by the fact that no other country is able and willing to replace the US at the core of the global system.

The historic downgrade not only highlights the weakened fiscal stature of the world's most powerful country, it may also be followed by a downgrade of other triple A countries, possibly France.

If that were to happen, it could complicate the already fragile efforts by Europe to rescue peripheral countries, most immediately Italy and Spain, after Greece, Portugal and Ireland.

In the face of these unprecedented and entirely unpredictable events, Mr Noonan remains determined to stick with a script as prepared at EU level.

The Finance Minister told the Sunday Independent: "It is a positive that action is being taken and that EU leaders are focussing on the challenges that must be addressed. It has been of note that as the crisis has developed, there have been positive developments for Ireland, namely the successful private sector investment in Bank of Ireland, the reducing spreads in our Government bonds, and Standard and Poor's recent assessment."

These positives, however, remain largely irrelevant. Ireland will not return to the bond market until 2013 at the earliest and the S&P's assessment reflects only a belief that the public finances here have stabilised somewhat.

In the Sunday Independent today, the economist, Colm McCarthy, says that while both the Bank of Ireland and AIB have been recapitalised and "should be" more secure for deposits, "they need to shrink their balance sheets further and cut costs."

He writes: "These two banks also need to restore public confidence and resume their role as distributors of credit."

Political leaders across Europe left en masse on holiday last week as the debt crisis worsened to a position not experienced since the collapse of Lehman Brothers in 2008.

Across Europe, leaders are on vacation: Angela Merkel is in the Italian Dolomites, Nicholas Sarkozy is on the French Riveria, Silvio Berlusconi is in a villa outside Milan, and Enda Kenny is thought to be in Kerry.

The flight of these and other leaders, ministers and many officials prompted Mr Prodi to say: "We don't know who is in charge."

Mr Noonan, however, was anxious to portray an impression that he and his officials were on top of the crisis.

"I and my officials are carefully monitoring the situation in the financial markets. We are in constant contact with our EU partners and the EU authorities regarding the emerging situation," he said.

"The Government will ensure that any measures will be to the benefit of Ireland as an EU member."

Report by JODY CORCORAN - Sunday Independent

Saturday, 6 August 2011

Euro Dream Becomes Nightmare...

Euro dream threatens to become nightmare...

ANALYSIS: LAST WEEKEND the world’s attention was on Washington DC as America’s politicians peered into the abyss of sovereign default. On Sunday they stepped back. This weekend attention is on Rome and Madrid. Politicians in those two capitals are sliding towards the same abyss.

But there is a big difference between the US and the Mediterranean countries. In America, that country’s leaders walked voluntarily to the edge of the chasm for political reasons. They were not beaten to that point by the bond market.

Political leaders in Italy and Spain are in an altogether more difficult position. They are being propelled towards the precipice because confidence in their economies is draining away. They are clutching desperately for something to halt the slide. But it appears ever less likely that they can save themselves.

With each passing week it seems increasingly clear that Europe is coming to a fork in the road: one route leads to deeper integration, with very considerable political implications; the other leads down into the dark valley of disorderly disintegration. The decision on which way to go will be among the most important collective choices taken by Europeans in the post-second World War era.

If a half century of integration ends in sudden disintegration, the European economic and political landscape will undergo huge upheaval. It is impossible to predict how it will look when the dust settles.

If, on the other hand, the euro zone countries bind themselves ever more closely together, the challenges facing the bloc will be enormous, but more predictable. For a closer union to succeed, a central issue – perhaps the central issue – will be whether the dangerous fault line that has opened up between the continent’s north and south can be closed.

While Greece looks destined to remain subject to intensive and intrusive outside intervention for many years to come, and Ireland and Portugal face tough, if shorter, journeys back to sustainability, they may be too small to make a closer union unsustainable, whatever happens to them.

But what happens to peninsular Europe’s big two – Italy and Spain – is different. If they cannot make themselves more like their northern neighbours a closer union might not survive.

What are their prospects?

The Italian state marked the 150th anniversary of its creation earlier this year. Its people did so with little celebration. Apart from Italy’s post-second World War decades of successful modernisation, most of this history has been one of underachievement and worse.

The Italian state’s first 50 years were marked by instability and weakness before two decades of fascist night descended over the country. Invasion, defeat and civil war in the 1940s left deep scars.

Now, the economy has been stagnating for almost two decades, with living standards barely rising and its once-vaunted industries – from textiles to autos – shrinking in the face of low-wage competition.

Italian entrepreneurialism and design flair succeeded in medium-tech industries when foreign competition was less intense, but success in high-tech sectors operating in a globalised context has been much harder to achieve.

One reason is schooling. Italy’s education system is ever more inadequate in preparing its young for the modern world of work and many of those who manage to do well are stymied in one of Europe’s least meritocratic societies.

Government influence on economies is often overstated, but it is important. Bad government in particular can have big negative effects on growth. The evidence that mismanaged public finances stifle growth is strong. And in this area Italy has long been a European leader – it is the only country to have a national debt bigger than its GDP uninterruptedly since the 1980s.

In the early 1990s the sweeping away of the cold war political parties and the jailing of many of the most corrupt politicians brought hope of better and cleaner government. Those hopes have long since been dashed.

The country’s long-time prime minister, Silvio Berlusconi, has dominated for most of that period. Even by the low standards of Italian politics, he has plumbed new depths. But however bad his actions, his inactions have been even more damaging.

Many of the reforms that could help spur the economy have gone unimplemented, despite his promises to shake the country up. Nor has he made much of a dent in Italy’s public debt mountain. His main appeal – that he could bring to the business of government the same get-things-done approach that made him one of Europe’s richest men – has proved baseless.

But Berlusconi will not lead Italy forever, and the country’s political class has shown that it can push through painful reform. Perhaps ironically, its biggest achievement in recent times was ensuring that Italy squeezed into the euro as a founding member. There is no such prize for taking radical action now. Instead, incentive comes from the need to avoid disaster. Italy’s politicians might yet rise to the challenge.

If Italy faces huge challenges, Spain’s are no less daunting.

Unlike the plodding Italian economy, Spain enjoyed a decade-long boom from the late 1990s. But the Iberian tiger, like its Celtic cousin, became engorged on credit. Property prices soared, construction boomed and competitiveness evaporated.

When the bubble burst the public finances went into a tailspin, the banks teetered and unemployment soared. It has suffered a much bigger shock than Italy and its economy is still on the floor, with consumers and households pinned down by huge mortgage debts.

Spain’s economy faces bigger challenges than Italy, with the exception of its government’s indebtedness.

With debts of 60 per cent of GDP in 2010, Spain has some breathing space (in Italy the figure was 120 per cent and in Ireland almost 100 per cent).

With such a manageable debt burden Spain does not look close to being insolvent, as the bond market has been moving towards concluding in recent weeks. So why the panic?

One reason for the recent loss of confidence in the country has been because fears are rife that its banks are not coming clean on their property losses. So far, those admitted to have been a tiny fraction of Irish banks’ losses, despite a property collapse there that is much more than a fraction the size of ours. Another suspicion is that the country’s 17 big-spending regional governments are keeping liabilities hidden.

If either or both of these suspicions have some basis in truth, Spain’s true debt levels are higher than officially stated.

But one reason to be optimistic about Spain relative to Italy over the long term is its more effective political system. This has been in evidence since the crisis erupted, with the government earning praise for undertaking some bold reforms and for reining in its budget deficit.

Although the Spanish are sometimes called the Germans of the south, the more likely explanation for their better governance is not cultural but institutional. Whereas in Italy the executive is weak and unstable – famously, the government has changed on average once a year since the second World War – in Spain, since the return to democracy in the late 1970s, governments have been stable and more effective.

This did not happen by accident but by design, and was informed by the lessons the two countries learned from their respective decades of dictatorship. While Italy’s 1948 constitution deliberately created a weak centre to avoid a repetition of the abuses in Mussolini’s time when power was highly centralised, Spain’s 1978 constitution created a strong and stable executive because weak government was seen to be a big factor in Franco’s seizing power in the 1930s.

Spain’s better political system gives reason to believe that it can manage its public debt problems, but no government can magic away a huge private debt burden or restore at a stroke chronic economy-wide uncompetitiveness. Even with lots of luck Spain faces a long and painful struggle.

Europe is in a bad place now. It looks increasingly likely that the euro zone countries will have to throw their fiscal lot in together in order to avoid cataclysm in the short term. But this brings its own risks.

Northerners will not like it. If they feel they will permanently foot the bill for southern profligacy they may rise up against it. That could get very ugly. The longer Italy and Spain remain in a slump, the greater the chances of that happening.

Southerners may not take their medicine lying down either. If their economies don’t return to growth, their peoples may reach breaking point. If they come to believe that an uncaring and alien force is imposing its will on them resentments could boil over.

The euro was designed to bring Europeans together and to crown decades of integration. It could end up causing deep divisions and, ultimately, disintegration.

Article by DAN O'BRIEN - Irish Times

Friday, 5 August 2011

Euro Crisis To Freeze Mortgages...

Euro crisis to freeze mortgage rate for year...

HOMEOWNERS will be spared mortgage increases for up to a year -- but face heavy losses in the value of their pensions as markets plunged all over the world.

The deepening euro crisis means interest rates are unlikely to rise for another year -- a reprieve for those on tracker mortgages.

But the short-term relief could be seriously offset by the decline in the value of pensions and investments.

They were worth hundreds of billions less after all the main European markets crashed by between 3pc and 4pc.

US markets also closed well down - at 4.8pc - last night.

And there are fears even more losses could pile up later today.

The European Central Bank (ECB) left its key interest rate unchanged and gave no signal of an imminent rise at its monthly meeting in Frankfurt.

Markets reacted by betting there would now be no further rate rise until well into 2013 -- as the euro crisis means the ECB cannot raise rates due to the fragile global economic crisis.

Some market experts were even pricing in a slight chance of a rate cut over the coming months.

But while mortgage rises have been avoided, the financial markets are in such turmoil that the whole euro project is now being questioned.

Spain last night opted out entirely from the markets as it could no longer raise affordable funds.

Rates have risen twice already this year, hitting almost 600,000 mortgage holders, adding €60 a month to the cost of servicing a €200,000 tracker mortgage.

It had been expected there would be at least one more interest hike this year.

However, ECB president Jean-Claude Trichet signalled the market turmoil engulfing the eurozone had effectively ruled out another rise for a year.

He was cautious at a press conference in Germany, saying it was "extremely important" to continue tackling inflation. But he struck a softer note on the risks of future inflation, the trigger that typically spurs the ECB into rate hikes.

The scale of the market turmoil was such that some banks started charging people a fee for accepting their deposits. Bank of New York Mellon said it would charge clients a fee for leaving money for safekeeping.

Gold hit a new high as investors fled for the only safe havens available -- Swiss francs and US treasury bonds.

It now looks likely that a fresh EU summit will be needed to help resolve mounting problems for Italy and Spain.

The pressure on Germany to effectively 'save' the euro will intensify if Italy in particular gets into further trouble.

The poor state of the global economy means Mr Trichet has been forced to shelve his plans for interest-rate rises.

Mr Trichet usually refers to the need for "strong vigilance" on inflation in the month immediately before announcing a rate hike. This is normally preceded by warnings of rising inflation the month before that.

Yesterday, he merely said the ECB would continue to "monitor very closely" any signs that inflation was on the rise.

However, he stressed "uncertainty was particularly high", a veiled reference to the debt crisis that threatens to overwhelm Italy and undermine Europe's ability to rescue economies.

This uncertainty means that while financial markets are not pricing in any interest-rate rises for the next two years, the markets may be wrong.

A year ago, markets weren't pricing in any interest-rate rises for 2011. They only changed their tune earlier this year when Mr Trichet's language hardened ahead of April's rate hike.

Industry sources also point out that even if interest rates aren't driven up by the ECB for the next two years, banks may still choose to up their own rates as they try to rebuild their battered balance sheets.

Movements

The markets, where billions of euro are staked on the likely movements in interest rates, now reckon there will be no rate rise until June 2013 at the earliest.

KBC Bank economist Austin Hughes said there was now a slowly-dawning realisation within the ECB that raising interest rates would only worsen the eurozone's economic problems.

"Trichet expressed concerns for the economic outlook. And there was a sense of a crawling realisation of the problems the eurozone economy faces.

"These problems will be with us for some time, so the threat of an ECB rate rise is off the agenda for the foreseeable future," Mr Hughes told the Irish Independent.

However, other analysts warned the ECB would be unable to resist pushing up rates.

"The ECB seems largely undeterred by recent developments and keeps pointing to further increases in interest rates," Ernst & Young senior economic adviser Marie Diron said.

Report by Charlie Weston, Laura Noonan and Emmet Oliver - Irish Independent

Thursday, 4 August 2011

New Clampdown On Landlords...

Revenue targets landlords in rental income crackdown...

TAX officials are making door-to-door checks in estates across the country to see if landlords are paying all their taxes.

Revenue officials are focusing on estates where there is known to be a high level of rented properties in the new clampdown on landlords.

They are probing landlords who have buy-to-lets to see if they are making the correct tax claims on their rental returns and to see if they are registered with the State as landlords.

It is part of an overall investigation by Revenue Commissioner officials into the black economy, the Irish Independent understands.

There are fears that many buy-to-let landlords do not register with the Private Residential Tenancies Board (PRTB), accept cash in rent and do not make tax returns.

It recently emerged that the State paid more than €250m last year to thousands of unregistered landlords.

Half of the landlords who get rent supplement payments -- which can be as high as €1,100 a month -- from the Department of Social Protection do not have their properties registered with PRTB, despite being legally obliged to do so.

Tax officials are also checking that the money used to buy the rental property has had the tax paid on it.

Cross-checks

Cross-checks are being made by looking at claims for rent relief from tenants, PRTB registrations, information on rent subsidies from the Health Service Authority and the Department of Social Protection.

Officials are also using data from local authorities on who has paid the second-homes tax.

Anyone who is found to have tax issues is then audited by the Revenue officials, a spokesman said.

"As part of its 2011 shadow-economy project, Revenue is additionally undertaking door-to-door checks of estates where there is a known high proportion of rented properties.

"Information obtained will be assessed in conjunction with other data at Revenue's disposal," the spokesman added.

Also part of the checks being done by tax officials is a probe of the 75pc mortgage interest restriction for residential landlords.

This was introduced in the 2009 emergency Budget.

Previously, landlords had been able to claim 100pc relief on the mortgage interest they paid on the loans for their properties.

The Revenue is determined to improve tax compliance as returns for the Exchequer have plunged. Income tax, the largest source of revenue, is now way off boom-year highs.

Earlier this year it emerged that Revenue officials were making unannounced visits to pharmacies, dentists, schools and charities in a fresh clampdown on potential tax evasion involving employees not properly registered for tax.

The Revenue is doing audits to establish whether all the people working there are categorised correctly for tax purposes.

Report by Charlie Weston - Irish Independent

Wednesday, 3 August 2011

Cruel Reality of Nama...

NAMA's fire sales show cruel reality...

WHEN NAMA put for sale signs on hundreds of the properties in its extensive portfolio last week, it gave a glimpse of the abyss into which the Irish property market has fallen. But it really was no more than that - a mere glimpse into the as yet uncharted depths of a catastrophe that has the potential to devour the country's economy and impose penury on the population.

On Thursday, NAMA announced its first set of annual accounts, which showed the ' bad bank' made a loss of €1.18 billion - that's one thousand and eighteen million - last year. The good news though is that it's mostly a 'paper' loss - we might not really be down by that much, it just depends on how the property market fares over the next few years. Given that the value of property in Ireland declined by a massive 2.1 per cent in July alone, there's not much reason to be overly optimistic there though.

At the same time as announcing its annual accounts, NAMA took the opportunity to put on the market 850 of the properties in its broad portfolio. So extensive indeed is this toxic portfolio that the current sale amounts to a mere tenth of all the €30.5 billion worth - if 'worth' isn't a complete misnomer - of the property on its books.

The range of properties on sale is a real cornucopia that includes pubs in the north of England, miscellaneous plots of Irish bogland and even an airport.

NAMA has been charged with the onerous task of doing the best it can with the properties it took over from over-ambitions developers whose hopes of reaping fortunes nose-dived when the bubble burst and they were left with properties they couldn't sell and loans they couldn't repay. Part of NAMA's strategy for recouping some of those losses is to sell off this 850 properties in a fire sale.

The properties will sell at well below their original value, but that's as good as can be expected in these straitened times and anyway the taxpayers will pay the balance on behalf of the banks whose reckless and unregulated pursuit of profit broke the country.

Whether NAMA was a good idea in the first place is a debate that is now consigned to history; as things stand though selling off those damned properties is the best that can be done and NAMA's €430,000 a year boss Brendan McDonagh is determined to see it through, with the help of his €400+ an hour experts. A problem for anybody without a lot of cash in pocket who wants to buy property these days is that the banks have all but stopped giving mortgages.

NAMA is promising to come to the rescue here though with an offer of loans of 20 per cent of the value of a property, plus a stunningly attractive cushion against falling property prices which will mean buyers won't have to repay their NAMA loan if the property loses value. According to NAMA this strategy is being pursued in the interest of kick-starting - dangerous word that - the property market.

It might well kick-start the market for NAMA properties, but it could well be a death sentence for the rest of the market. With NAMA offering the best prices and loans around, nobody in their right mind is going to consider walking in the door of their local estate agent to buy a house in the normal way.

This will go on for some time to come because after the current NAMA property bargain bin is sold out we can expect there will be another and another after that until the whole heap is disposed of. That's NAMA's job and it's the best the agency can do in the interest of the taxpayers who, ultimately, will pay for the clean up job on the banks and the property market. The flip side of this though is that property prices are likely to be dragged down further. This means that the tens of thousands of homeowners in negative equity will be even worse off and will have even less chance of selling up and cutting their losses.

As for estate agents - they might as well shut up shop. On the positive side, however, while NAMA's fire sales will hardly kick-start the property market, it will restore a sense of reality - albeit a harsh one - to a market that had complete lost the run of itself. People will, hopefully, be able to look again at a house in terms of its real value, free from the marketing hype that somehow persuaded so many people that it made sense to pay prices that were plainly off the scale.

Report - Enniscorthy Guardian

Tuesday, 2 August 2011

Nama Negative Equity Scheme...

Nama proposes negative equity scheme...

Nama is proposing a deferred payment scheme to protect property buyers against the risk of negative equity in an attempt to kick-start the property market.

The agency wants to introduce a scheme where Nama would waive 20 per cent of the purchase price on one of its 8,000 Irish residential properties after five years if the property were to fall further in value.

Customers will deal with the banks on the scheme and will have no engagement with Nama.

Chairman Frank Daly said the agency was in talks with the Minister for Finance and the Department of the Environment about the agency’s proposals.

“We are teasing this through. We want to analyse the full impact of it and we would hope to make an announcement early after the summer,” he said at the launch of the agency's 010 annual report.

The State loans agency, set up to take the most toxic assets out of the banking system, has loans on its books linked to 12,000 houses and apartments, a third of which are overseas.

Chief executive Brendan McDonagh suggested the scheme could apply to 5,000 houses and apartments and that if they were sold for €200,000 each, this could lead to sales that would raise €135 million for the exchequer through VAT receipts.

The most the State could lose on the scheme was €65 million – the difference between the amount raised in Vat from the property sales and the €200 million which would be waived in the event that the properties fell further in value over five years.

The idea is driven by the shortage of available mortgage finance at the banks and the reluctance of potential buyers to purchase amid concerns that property prices would decline further, according to the agency.

“This is where Nama is proposing to step in to ease the fears of negative equity that are still out there among potential purchases and which I can fully understand,” said Mr Daly.

“Our overarching principle is to get the residential property market moving again,” said Mr McDonagh.

He said that the scheme would not put State money at risk. “Effectively the taxpayer is already at risk in terms of having actually bought the assets off the banks in the first place,” he said. “We are trying to get some activity going in the market and get the property market moving at a sustainable level, getting tax receipts into the exchequer.”

Mr Daly said that he understood that home owners with loans outside Nama might be concerned about the effect on the value of their property and the agency interfering in the market.

“This has the potential to lift all boats. We are not getting into the market in a huge way,” he said. “What we are talking about is a very modest intervention with the objective of getting something moving there and if the market gets moving it will advantage them.”

How the scheme would work

Nama would try to sell a house or apartment linked to one of its loans by putting it on the market for €200,000, for example. The purchaser would have to have a €20,000 deposit and would then apply for a mortgage from one of the two “pillar” banks, Bank of Ireland or Allied Irish Banks.

To encourage the buyer to complete the sale and to ease fears about negative equity – where the loan is worth more than the value of the property – Nama would agree to defer the payment of 20 per cent of the value of the property – in this case, €40,000.

The bank then approves the buyer for a mortgage of €180,000 and the buyer makes the repayment on this loan. If after five years the property is still valued at €200,000 or more, then Nama will collect the outstanding €40,000 from the bank. The repayments do not change.

If the property has fallen in value to say €160,000 then Nama would waive the outstanding €40,000 from the purchase price agreed five years earlier. As a result, the home owner would be ahead on their repayments and avoids negative equity as the mortgage is based on €140,000 rather than the original €180,000.

As a result, the bank and the home owner reschedule the remaining repayments around a mortgage of €140,000.

“One of the big issues that we hear about every single day here from people contacting us is that they go to try to buy a house for €200,000. They believe they have 80 or 90 per cent mortgage approval from the institution,” said Mr McDonagh.

“They go through everything to try to buy the house and they go to the institution and the institution says that it is only worth €180,000 and they will only give them 80 per cent of 180,000.”

Report by SIMON CARSWELL - Irish Times

Monday, 1 August 2011

Many Wiped Out By Recession...

300,000 are 'wiped out' by the recession...

THE average Irish person is now about 30 per cent worse off than they were before the recession, a startling new report has found.

The report, by economist consultants at Indecon, also found that almost 300,000 people had been wiped out financially over the last four years.

These 300,000 people have seen their incomes plummet by about 50 per cent because most of them were in well-paid full-time jobs in 2007 but are now relying on the dole after the recession forced them out of their jobs.

The report, which was given exclusively to the Sunday Independent, is the first to examine the toll of the recession on the everyday finances of ordinary people.

Its findings come in the wake of Environment Minister Phil Hogan's decision to hit most homeowners with a €100 household charge and a new Government plan to slash the pay rates of tens of thousands of future workers in areas such as catering, hotels, retail and hairdressing.

At the heart of the Indecon report is its finding that the national income per person -- also known as the GDP per capita and a key indicator of a country's standard of living -- has dived from €38,606 in 2007 to just €27,569 today.

Those who lost full-time jobs aren't the only ones to have taken a massive hit financially over the last four years. To survive the recession, many employers have cut back the working weeks of staff -- which has pushed the numbers in part-time jobs up by about a fifth over the last four years. In early 2007, 361,400 people were in part-time jobs and this has since swelled to 426,700, according to the report.

Indecon believes that it is largely staff in the private sector who have been forced into part-time positions and that most public sector staff have been able to hold on to their full-time jobs. This is one of the main reasons why private sector workers have seen their weekly earnings fall over the last four years while public sector workers have seen their earnings rise.

Private sector workers who are fortunate enough to still hold on to their jobs have seen their weekly earnings before tax fall from €639.05 in 2007 to €602.85 earlier this year, while the weekly earnings of public sector workers increased from €847.17 to €871.09, according to the report.

Tax, however, is eating up a much bigger chunk of weekly earnings than it did in 2007, with the tax bills of low-paid individuals almost doubling over the last four years.

A single person earning €20,000 is now paying €1,960 a year in tax, compared to €1,020 in 2007, according to Indecon. A single person earning €25,000 is paying almost 30 per cent more tax than they did in 2007, while a single person earning €100,000 has seen their tax bill increase by about a fifth.

"Individuals and families who previously had full-time, reasonably paid jobs and who are now dependent exclusively on social welfare face the biggest challenge from the downturn," said Alan Gray, managing partner of Indecon.

"These people have been obliterated, especially where there has been a loss in jobs and where individuals had high mortgages."

Mr Gray said that the collapse in the financial wellbeing of Irish people over the last four years had had a direct impact on confidence.

"Individuals and businesses have been afraid to spend or invest," said Mr Gray. "This is reflected in the escalation in the level of savings. Unless confidence returns, consumer demand and employment will remain depressed."

Report by LOUISE McBRIDE - Sunday Independent