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"NAMA ... [an] attempt to prevent downward price corrections"
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Treehouse72 wrote: »I see. The banks take most of the hit. Well, that's just grand then.
And just to clarify for all the world - you know of no problems that this would present?
As I have previously pointed out I am not particularly a fan of NAMA. I am pointing out the errors people are making when discussing NAMA. People go into automatic when discussing NAMA as has been apparent tonight.Treehouse72 wrote: »100% correct.
But a question: if their loans are not being transferred to NAMA because they are bust, then why are their loans being transferred? Why would you transfer the loans of non-bust borrowers into an asset recovery vehicle? I'd appreciate if you could help me out on this.
They have to. Developers cannot choose. The banks cannot choose. To enter NAMA the banks must agree all or none.Treehouse72 wrote: »Sorry, I've done some additional reading and I get NAMA now:
> Developer has €100m loan
> It is transferred into NAMA, who pay €70m for it
> The developer continues to repay this loan
> The developer's business continues as a profitable entity, and the loan is paid off and no one is worse off.
If developer has loan for 100 million and the loan is funding itself then it is very unlikely the value would be 70 million but if it was then what you say is correctTreehouse72 wrote: »> If the developer can't repay, NAMA sells the property behind it for €75m and makes a €5m profit
Best.
Plan.
Evar.
No again here you are wrong. Perhaps you need to read a little more. If NAMA paid 70 million and the developer cannot make repayments then NAMA can reposess property and sell on open market. As NAMA will have paid market value plus 10% that means it will sell for 64 million (assuming property hasn't fallen further). So it will make a loss of 6 million. No one is happy. Bank will have lost 30 million, developer will have gone bust and NAMA will have lost 6 million.0 -
Beeno, I am not trying to win an argument here or score cheap points. I am genuinely trying to show you how massively, massively mistaken you are in your understanding of NAMA.
Take the final example above. The bit that you are completely missing is that the difference between the original €100m loan and the amount NAMA pays for it - say €70m - stll has to be found from somewhere. You keep on stating that once NAMA buys the loan, that's it, the loan has gone from being a €100m problem to a €70m problem. This is incorrect...there is €30m missing in the middle.
You say that this cost is bourne by the banks. But that's the heart of the problem: the banks do not have the capital to cover that cost and there are no private investors to provide it either. If they did, there would be no need for NAMA, right? So the state needs to step in and fill the hole. We are on the hook for that €30m. And that is before we allow for the possibility we might not even get €70m for the asset - it could be worse than a €30m hit. There is a shrinking pool of people with €70m to spend on anything in this country.
The other issue is the developers. You must understand that developers remaining in "business" is not a solution to anything. After all, what can developers do? Build and sell gaffs. For crying out loud, surely every person in the country by now understands that buying and selling gaffs does not create wealth. The opposite, it destroys wealth in an unproductive asset, transaction costs, opportunity costs and god knows what else.0 -
Yes, because interest rates are going up and while you may be able to afford you repayment at €X, can you afford it at €X+1000?
Why pick a fixed constant? surely if Interest rates can increase by X + deltaX
the deltaX depends on the remaining amount.
If you're paying a mortgage of 490pm then 1500pm is a large overhead. if you're paying 4,900pm then 1500 is a wee bit less as a proportion
Fixed numbers are bollicks, well anything above 3xDole are anyway.0 -
Treehouse72 wrote: »Beeno, I am not trying to win an argument here or score cheap points. I am genuinely trying to show you how massively, massively mistaken you are in your understanding of NAMA.
Take the final example above. The bit that you are completely missing is that the difference between the original €100m loan and the amount NAMA pays for it - say €70m - stll has to be found from somewhere. You keep on stating that once NAMA buys the loan, that's it, the loan has gone from being a €100m problem to a €70m problem. This is incorrect...there is €30m missing in the middle.
You say that this cost is bourne by the banks. But that's the heart of the problem: the banks do not have the capital to cover that cost and there are no private investors to provide it either. If they did, there would be no need for NAMA, right? So the state needs to step in and fill the hole. We are on the hook for that €30m. And that is before we allow for the possibility we might not even get €70m for the asset - it could be worse than a €30m hit. There is a shrinking pool of people with €70m to spend on anything in this country.
The loss is borne by the banks. You obviously believe that they will be unable to do this and will need additional government money. Perhaps you are right. The market seems to disagree with you with regards to AIB and BoI anyway. AIB is writting off its losses over 2009 and 2010 and will probably have a 6 billion loss over these 2 years. They intend to sell assets to make up for this loss and perhaps a rights issue. The market believes them and feels the chances of the government taking a significant extra stake has reduced. As a result AIB's share price has increased 50% in the last few days since the results and future plans were announced. As I said they may be wrong and you may be right. However there are other opinions out there than those you read on boards.ie
.Treehouse72 wrote: »The other issue is the developers. You must understand that developers remaining in "business" is not a solution to anything. .
I never said it was. However I believe it is better for any viable business to be able to continue than go bust. Obviously if they are not viable then they will go bust. This is the typical reaction here. As I said before, once NAMA is mentioned people go into automatic mode and don't consider what has actually been written. Same goes for the words "property developer". You see the word and go into automatic mode. You use ridiculous phrases like "you are living in bubblesville" as if there are only 2 types of opinions either property is going to drop to 0 or return to 2006 levels. Like Amhran Nua's comments which have nothing to do with anything I said eg
"Property is dead as disco, beeno67. We have to fund our own domestic export based industries in order to move the country forward. The bubble wasn't business as usual, it was an extremely unfortunate aberration, regardless of the efforts from the Publican Party to resuscitate it. "
Well there are a huge amount of opinions in between. My opinion for what it is worth is that if a business can keep going and pay as much of its debts as possible then that is better for everyone including taxpayers than it going bust.0 -
As mentioned, that's jumping to the end result of about five pages of back-and-forth. This discussion has been had before, many times.Like Amhran Nua's comments which have nothing to do with anything I said eg
"Property is dead as disco, beeno67. We have to fund our own domestic export based industries in order to move the country forward. The bubble wasn't business as usual, it was an extremely unfortunate aberration, regardless of the efforts from the Publican Party to resuscitate it. "
You are quite right in that. However you do need to look at the businesses in the context of the wider economy and longer term trends, and balance it against various social issues as well - what you're talking about here is making them sustainable through the taxpayer paying their bills, which isn't sustainable in any sense. And if the taxpayer has to take up the shortfall via bank recapitalisation after NAMA, thats exactly whats happening.Well there are a huge amount of opinions in between. My opinion for what it is worth is that if a business can keep going and pay as much of its debts as possible then that is better for everyone including taxpayers than it going bust.
What you are saying might only marginally make sense if inflation adjusted property prices were restored to 2006 levels, ergo making these businesses "sustainable" again. Would you see that as being a likelihood?0 -
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Amhran Nua wrote: »As mentioned, that's jumping to the end result of about five pages of back-and-forth. This discussion has been had before, many times.
You are quite right in that. However you do need to look at the businesses in the context of the wider economy and longer term trends, and balance it against various social issues as well - what you're talking about here is making them sustainable through the taxpayer paying their bills, which isn't sustainable in any sense. And if the taxpayer has to take up the shortfall via bank recapitalisation after NAMA, thats exactly whats happening.
What you are saying might only marginally make sense if inflation adjusted property prices were restored to 2006 levels, ergo making these businesses "sustainable" again. Would you see that as being a likelihood?
Well done Amhrain Nua. Once again go on a rant and ignore anything that has been said. I love the way you got in me wanting property prices returning to 2006 levels which pretty much makes my earlier point that I directed to Treehouse.
"You use ridiculous phrases like "you are living in bubblesville" as if there are only 2 types of opinions either property is going to drop to 0 or return to 2006 levels. Like Amhran Nua's comments which have nothing to do with anything I said "
The anti NAMA comments here so far have been from people who
1. Do not know how the valuation system works
2 Do not know the criteria under which loans are transferred to NAMA
3 Do not know what % of proerty is expected to be overseas.
These are 3 fundamental issues with regards to NAMA yet people like yourself make sweeping generalisations without even knowing the basics. I have no problem with people disagreeing with NAMA (although it is going to happen anyway) and as I said I am not too impressed with it either. But, at least learn a little about NAMA before you go on another rant.0 -
That was a question, not a statement. Can you respond to it rather than avoiding it please, in the interests of furthering the discussion. Do you see it as being likely that property prices will return to their inflation adjusted 2006 levels?I love the way you got in me wanting property prices returning to 2006 levels which pretty much makes my earlier point that I directed to Treehouse.0 -
I think the biggest fear the general public have about NAMA reflects the general sense of mistrust people have in government, and from a personal point of view its the phrase "Long Term Econonmic Value" that is frightening we are taking over loans from banks at an assumed "LTEV" who set this value are they the same people who told us only 2/3 years that "those of you talking down the economy should jump off a cliff" ,the following link details NAMA's plan
http://www.nama.ie/Publications/2009/NAMAPresentationNov2609UCD.pdf
Embedded in this they set out there own risk assessment:
"Valuations outside expected range – risk that assets are more
impaired than anticipated resulting in larger bank losses."
there are over 21,000 loans going into NAMA how can they properly assess there current Market Value let alone any LTEV, the 13m midlands property has been mentioned a number of occasions this has an estimated current market value of 600k but we have no way of knowing what the LTEV NAMA has paid for it, is it 600k, 1m 2m etc and we won't know? Property in Ireland has dropped between 50-90% from peak yet we're paying only 30% below estimated current value and value from 2007 not 2010 where it is still dropping, 70% of the 21,000 loans are from Ireland do we really expect prices to rise 20% in Ireland over the next 10 years: 500,000 on the dole, rising interest rates, rising energy costs, minimum wage amongst highest in developed world we're not realisitic in this country, we weren't realisitic about the property boom and now we're repeating the mistake and being unrealisitic about the recovery we are a small island off the coast of Europe with 4m people. How can we compete with 1b Chinese 1.5b Indians.
Unless we face reality we'll always be stuck here:
Emmigration is part of us, real wage reform is a neccessity, reduction in civil service numbers is vitally important, education needs to enter the 21st century.
One question always annoys me about property is why 3 years into a property crash (note not correction) can we still not see what houses are actually selling for on streets, this is comically I wouldn't buy a loaf of bread without the price displayed yet we spend hundreds of thousands on houses without ever trully knowing their real value.0 -
Amhran Nua wrote: »That was a question, not a statement. Can you respond to it rather than avoiding it please, in the interests of furthering the discussion. Do you see it as being likely that property prices will return to their inflation adjusted 2006 levels?
Well they don't have to so it is pretty irrelevant. Obviously if they did NAMA would make enormous profits.0 -
I think the biggest fear the general public have about NAMA reflects the general sense of mistrust people have in government, and from a personal point of view its the phrase "Long Term Econonmic Value" that is frightening we are taking over loans from banks at an assumed "LTEV" who set this value are they the same people who told us only 2/3 years that "those of you talking down the economy should jump off a cliff" ,the following link details NAMA's plan
http://www.nama.ie/Publications/2009/NAMAPresentationNov2609UCD.pdf
Embedded in this they set out there own risk assessment:
"Valuations outside expected range – risk that assets are more
impaired than anticipated resulting in larger bank losses."
there are over 21,000 loans going into NAMA how can they properly assess there current Market Value let alone any LTEV, the 13m midlands property has been mentioned a number of occasions this has an estimated current market value of 600k but we have no way of knowing what the LTEV NAMA has paid for it, is it 600k, 1m 2m etc and we won't know? Property in Ireland has dropped between 50-90% from peak yet we're paying only 30% below estimated current value and value from 2007 not 2010 where it is still dropping, 70% of the 21,000 loans are from Ireland do we really expect prices to rise 20% in Ireland over the next 10 years: .
Fair enough comments really. Price being paid as you say is current price plus 10%. This represents a "haircut" of about 30% on original loans. Obviously the majority of these loans were not taken out at the peak. The valuations have not been published yet so it is hard to criticise the valuations yet.0 -
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ANYONE can get an average price in an area, look on daft.ie ,prices have been going down every year.
I see houses in dublin west going from 300k in 2006 ,to 180k now .THATS for a private house in perfect nick, on a private estate.
And if you want a cheap house go for an older house that needs redecoration ,renovation.
THE 1st law of the market is buyer beware.AS other countrys have shown ,theres much cheaper ways to rescue the banks than nama.
And the government could just wind up anglo, rather than pay 20billion to rescue it.
ITS a zombie bank,which lent recklessly and made some transfers to another bank in a very suspicious manner just be4 its annual report was due .I understand the government has to honor its gaurantee re deposit accounts ,but it doesnt have to spend 20billion on 1 small bank.
IT would be much cheaper to nationalise aib and boi and then say privatise them in 5 years when the financial system is more stable.
IF some1 pays more than 220k for a house in dublin now its because they want to live close to where they work ,or school,or they are on a high income.
ALL the info re house prices is on the web,
obviously any house can go for x amount plus, if theres a number of people bidding on it .
ITS not like a can of beans ,ie i can go to aldi and pay 20cents,thats it.
ie people buy houses primarily in terms of location, is it near schools,shops, transport links etc
does it have status etc thats why a house in killiney costs abit more than a house in coolock.
JABBER , do you expect a label on each house, this is worth 190k ,not a penny more, no bidding allowed.IE i wont accept 210k, 190k is all i,ll take.
WE are a democracy ,its a free market ,you can set the price at whatever you like.
IF its too much no one will buy it, and the estate agent will advise you ,if you have no idea what its worth.0 -
Ricman
I expect the final sale price to be listed against properties, you mention Daft and its clear for the same estate listed prices can vary by values from 1k to 150k+. Why because some estate agent deems them that price, anecdotal evidence has prices being sold for considerable price differentials from list prices(both during and after boom) surely there is no reason apart from deceit not to display final sale price, if final sale price is the price someone is willing to pay then thats what its worth end of discussion(would this not aid the whole NAMA debate) Of course house prices are based on sentiment desirability but how does this stop final sale prices being listed. Pubs in different parts of the country charge different prices and both are listed. The buyer is then left with the decision to purchase or not based on hard facts not estate agent opinion. Seems to me there is no Honest reason not to disclose the amount, it leaves buyers and sellers and even banks in a better position to gauge their true worth. Buyer beware BS...Why should there be any fear factor when purchasing the single largest item of your life, if you knew the last price a house went for, it would in my opinion bring a lot more honesty back into a totally corrupt business.0 -
So this whole LTEV thing everyone is talking about is a smokescreen of some sort, is it? I'm having difficulty pinning down what exactly you are in favour of at the moment. NAMA has a purpose, already clearly outlined in this thread, and its purpose is not to bail out developers.Well they don't have to so it is pretty irrelevant.
If you think that is its purpose, you are mistaken.
Its also a very poorly thought out plan, as almost every significant economic authority agrees. The market might not agree this week, but this was the same market that had AIB shares at many multiples of their current prices only a couple of years ago; anyone using the markets as a measure of actual value doesn't understand how the markets actually work.0 -
I,M not an expert on commercial property, if you wanna buy house x ,just compare it with a house in a similar area, same size ,specs, does it have an alarm, new kitchen, size of garden etc.
IF you are buying a shop,pub you are allowed to look at the acounts 4 the last 2 years,to see what the expenses/ profits are .ie a pub in rathmines will make more than say a pub in a village in the middle of nowhere.
AND you will employ an independent expert ,eg a commercial expert/ specialist /accountant to advise you re the value of the pub/shop.
WOULD you pay 300k now for a house now, without even looking at what are houses in a 2mile radius going for.IF the house 500 yards a way is going for 210k, well then one of the houses is wrongly priced.
OBVIOUSLY you can look on daft.ie and see a house going for 250k, when the other identical houses in the estate are going for 200k.
ie some people are unhappy, cos they paid 300k,and now their house is only worth 240 now, but thats the way the market works.0 -
Ricman,
You seem to be dancing around the point, if all this information is available why not the last piece of the puzzle Final Sale Price, without this all else is speculation... Is this not what got us into this mess, speculators.
You keep mentioning the market and how it works, but we are talking about speculating with people's life savings here, real people! Even the stock market lets us know the current true price of what we are buying.
In the UK all sale prices are available does it affect the market there, they still have bubbles inflate and burst what are we afraid of in Ireland. To me it again smacks of the old crony society we have built up. The political establishment is too tightly associated with the car industry, large estate agents, property developers, construction industry, we can't get the information because we'd only then know the true extent of the crisis this country is in. If the government were truly concerned about the ordinary Joe Soap we'd have this information already but their more concerned about protecting themselves and their backers.0 -
Daft.ie and Myhome.ie clearly demonstrate that noone has a clue what property is worth.
Very little property is being sold, you can see similar houses in the same estate as said above for wildy differing prices. 200k for one 290k for another, neither having sold in the months they have been listed.
People wanting to move, and people wanting to leave the country will have a price at which they need to sell their house to enable the move, or break even on the outstanding mortgage. Thats the prices we are seeing in auctioneers and online atm. Imo they are way above the actual value of the properties.
Its a mexican standoff between buyers and sellers. Sellers in most cases have a bottom figure thats way above the market value, buyers correctly think the houses are overpriced and the buttom of the market hasn't been reached.
If you had to sell your house tomorrow at the value the highest bidder put on it, you'd be in for a hell of a shock imo. Couple that with the dirth of credit being offered by the banks atm, and the impact that has on the market, and its no surprise noone is selling a house at the moment.0 -
Amhran Nua wrote: »So this whole LTEV thing everyone is talking about is a smokescreen of some sort, is it? I'm having difficulty pinning down what exactly you are in favour of at the moment. NAMA has a purpose, already clearly outlined in this thread, and its purpose is not to bail out developers.
If you think that is its purpose, you are mistaken.
Yes Amhran Nua I know it is not to bail out developers and I never said it was nor do I think it should be. Is that clear enough for you. As regards your total failure to grasp the concept of LTEV perhaps you should read the link jabber2 gave in one of his previous posts. Here it is again.
http://www.nama.ie/Publications/2009...Nov2609UCD.pdf
Under "Common misconceptions" it says
Some commentary has suggested that property market will need to recoverinto account the 5% of subordinated debt (€2.7 bn).
to 2004-2007 levels for NAMA to break even. The scale of recovery
required is, in fact, a more modest 10% over the lifetime of NAMA taking
Property does not have to return to 2006 levels.0 -
It does if you want those businesses to be "sustainable" again without a massive taxpayer bailout. I don't think we're dealing with the same issues though, so I'll ask - to get us both in the same frame of reference - are you in favour of NAMA as the best possible option?Property does not have to return to 2006 levels.0 -
Yes Amhran Nua I know it is not to bail out developers and I never said it was nor do I think it should be. Is that clear enough for you. As regards your total failure to grasp the concept of LTEV perhaps you should read the link jabber2 gave in one of his previous posts. Here it is again.
http://www.nama.ie/Publications/2009...Nov2609UCD.pdf
Under "Common misconceptions" it says
Some commentary has suggested that property market will need to recoverinto account the 5% of subordinated debt (€2.7 bn).
to 2004-2007 levels for NAMA to break even. The scale of recovery
required is, in fact, a more modest 10% over the lifetime of NAMA taking
Property does not have to return to 2006 levels.
My God, your arrogance and lack of humility is shocking given your utter delusion on this matter.
As you point out, in April 2009 when establishing NAMA Brian Lenihan said that property would need to rise 10% in 10 years for NAMA to break even. You are 100% correct on this.
The problem is that we are now one year on from that and property has fallen almost 20%. That means a €100 house in April 2009 is now worth €80. By the end of Mr. Lenihan's time frame - April 2018 - it needs to have reached €110. That leaves the price needing to rise 35% in the next 9 years April 2010 - April 2019.
Do you think this is likely? Are you saying this is not evidence that Bubble 2.0 is part of the government's stratgy? That they, like you, are still living in the bubble? (Rhetorical questions, naturally).
And I never responded to your earlier post that stated it was possible that private money would fill in the capital at AIB and BoI. I wrote a long reply but really couldn't be bothered posting it because you have shown so little effort to meet half way. You are just arguing to defend your position. Anyway, here's something from today that might help you:
http://www.independent.ie/opinion/analysis/the-836490bn-double-or-quits-gamble-2091277.html0 -
Join Date:Posts: 30618
Guys- refute each others posts- but keep it civil, and do not personalise it.
Regards,
SMcCarrick0 -
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Treehouse72 wrote: »My God, your arrogance and lack of humility is shocking given your utter delusion on this matter.
As you point out, in April 2009 when establishing NAMA Brian Lenihan said that property would need to rise 10% in 10 years for NAMA to break even. You are 100% correct on this.
The problem is that we are now one year on from that and property has fallen almost 20%. That means a €100 house in April 2009 is now worth €80. By the end of Mr. Lenihan's time frame - April 2018 - it needs to have reached €110. That leaves the price needing to rise 35% in the next 9 years April 2010 - April 2019.
Except the valuations are on current market price + 10% not last years price. The banks have had to adjust their forecasts to reflect this. So price needs to rise 10% in next 10 years not 35% in 9.Treehouse72 wrote: »And I never responded to your earlier post that stated it was possible that private money would fill in the capital at AIB and BoI. I wrote a long reply but really couldn't be bothered posting it because you have shown so little effort to meet half way. You are just arguing to defend your position. Anyway, here's something from today that might help you:
http://www.independent.ie/opinion/analysis/the-836490bn-double-or-quits-gamble-2091277.html
My effort to meet halfway on what? I have said I am not too impressed with NAMA 3 times. I have said you may be right that banks will need further recapitalisation. I have looked a lot at NAMA and I now feel it might break even or loose only a relatively small amount, 5 billion or so over 10 years I would feel is the max loss. Of course I may be wrong but at least I have looked at it.
You are arguing from a point where you did not know how or when the valuations are done, you did not know how much property has to rise, you did not know what kind of loans are included. It is very difficult to argue with you. Since this thread has started you have learned that many performing loans are included in NAMA and that property has to rise 10% over next 10 years not 35% over 9. Has this not changed your opinion in any way? There is a huge difference between 35% and 10%. Do you not feel this should change your opinion on the overall loss you feel NAMA will make? Actually don't bother answering I have had enough. Just read the link from Jabber2 about NAMA and argue from a more informed view. As I have said before you are fully intitled to believe NAMA will make a loss.0 -
Well done Amhrain Nua. Once again go on a rant and ignore anything that has been said. I love the way you got in me wanting property prices returning to 2006 levels which pretty much makes my earlier point that I directed to Treehouse.
"You use ridiculous phrases like "you are living in bubblesville" as if there are only 2 types of opinions either property is going to drop to 0 or return to 2006 levels. Like Amhran Nua's comments which have nothing to do with anything I said "
The anti NAMA comments here so far have been from people who
1. Do not know how the valuation system works
2 Do not know the criteria under which loans are transferred to NAMA
3 Do not know what % of proerty is expected to be overseas.
These are 3 fundamental issues with regards to NAMA yet people like yourself make sweeping generalisations without even knowing the basics. I have no problem with people disagreeing with NAMA (although it is going to happen anyway) and as I said I am not too impressed with it either. But, at least learn a little about NAMA before you go on another rant.
Just as a casual observer, you seem to be the only one here getting animated about this tbh (calling other poster's posts rant etc when they really do seem quite reasoned).
The others, to my eye, are just politely pointing out anomalies in what you're saying.0 -
Except the valuations are on current market price + 10% not last years price. The banks have had to adjust their forecasts to reflect this. So price needs to rise 10% in next 10 years not 35% in 9.
My effort to meet halfway on what? I have said I am not too impressed with NAMA 3 times. I have said you may be right that banks will need further recapitalisation. I have looked a lot at NAMA and I now feel it might break even or loose only a relatively small amount, 5 billion or so over 10 years I would feel is the max loss. Of course I may be wrong but at least I have looked at it.
You are arguing from a point where you did not know how or when the valuations are done, you did not know how much property has to rise, you did not know what kind of loans are included. It is very difficult to argue with you. Since this thread has started you have learned that many performing loans are included in NAMA and that property has to rise 10% over next 10 years not 35% over 9. Has this not changed your opinion in any way? There is a huge difference between 35% and 10%. Do you not feel this should change your opinion on the overall loss you feel NAMA will make? Actually don't bother answering I have had enough. Just read the link from Jabber2 about NAMA and argue from a more informed view. As I have said before you are fully intitled to believe NAMA will make a loss.
The Mods' warnings about personal remarks stop me from responding how I'd like to this festering pile of patronising, ill-informed, ignorant nonsense.
Now, where is that User Ignore function....0 -
Treehouse72 wrote: »The Mods' warnings about personal remarks stop me from responding how I'd like to this festering pile of patronising, ill-informed, ignorant nonsense.
Now, where is that User Ignore function....
I had not intended to reply to this topic any more but I find your last comment insulting.
You say my previous comment was ill-informed and ignorant nonsense. Perhaps you should explain more. I made 2 essential points. Are they both nonsense or just one. My points were
1. You did not know that some performing loans would be included in NAMA. Now if you did know this, then I apologise, but your comments led me to believe you did not.
2. You believe valuations were done last year and property has fallen since. This is untrue. Valuations are being carried out at present and are based on current prices, Indeed this is one of the main reasons people believe the banks will need extra capitalisation. You asked me to read an article from The Sunday Independent. Even that article said
"the valuation on the bad loans are far lower than the 30 per cent originally estimated."
If there was a different point you felt was "ill-informed and ignorant nonsense" then please point it out.0 -
I had not intended to reply to this topic any more but I find your last comment insulting.
You say my previous comment was ill-informed and ignorant nonsense. Perhaps you should explain more. I made 2 essential points. Are they both nonsense or just one. My points were
1. You did not know that some performing loans would be included in NAMA. Now if you did know this, then I apologise, but your comments led me to believe you did not.
2. You believe valuations were done last year and property has fallen since. This is untrue. Valuations are being carried out at present and are based on current prices, Indeed this is one of the main reasons people believe the banks will need extra capitalisation. You asked me to read an article from The Sunday Independent. Even that article said
"the valuation on the bad loans are far lower than the 30 per cent originally estimated."
If there was a different point you felt was "ill-informed and ignorant nonsense" then please point it out.
Beeno, I really don't mean to be rude. I am just so angry and frustrated at what's happening in this country that I can barely keep my manners any more.
1. Of course I knew that all loans over €5m were going into NAMA, whether performing or non-performing. But it doesn't matter, because the crucial point is that the performing loans are dwarfed by the non-performing ones to the tune of billions and billions. The clearest analysis I know on this is Peter Matthews':
http://bankermathews.com/nama-whats-wrong/
He shows that 60% of the loans are Non-performing, €46.20 bn worth, while 40% of the loans are Performing, worth €30.80 bn. He does several scenario calculations based on these facts, and in each case is incredibly generous to the upside. For example, he does some calcs allowing for 100% recovery of the performing loans, which in itself is wildly optimistic.
He estimates that for NAMA to break even (the very issue we were discussing), there needs to be 100% recovery on performing and 50% recovery on non-performing loans. This is simply absurd, as is being shown in Judge Peter Kelly's court every day, where 80%+ drops in the value of the underlying assets are normal nowadays. The maths are there on Matthews site and are very straighforward. Matthews best case scenario is an €11b loss, the worst €26b and the most likely outcome €17b.
2. Firstly, on the quote you cite, when he says the valuations are lower than 30%, he means they are worse. They require a greater haircut than 30%.
Second, I am talking about the projections made by Brian Lenihan when announcing NAMA and in the subsequent business plan. IT WAS AT THAT TIME that Mr. Lenihan said that for NAMA to break even property prices would need to rise 10% in 10 years. This was of a piece with the mooted haircut of 30% on aggregate across all the loans going into NAMA. The fact the actual valuations are only being done now doesn't matter except to the extent that they reveal how ridiculously optimistic the 30% figure was.
My point has been that this projection is now a busted flush, since prices are down up to 20% since then. This changes the 10%/10 years plan utterly. As my sums showed, €100 > €80 > €110 = a 35% rise in price from this year to 2019 is required. Again, Matthews addresses this directly, and his maths are obviously better than mine, and more extreme I think:
And all this is above and beyond capitalisation needs. You say the market might cover that, I say this is delusion on an epic, epic scale. I am not trying to win an argument here Beeno or score points. I don't want to rub it in, but on page 2 of this thread you said this:NAMA requires the prices of underlying assets to go up by 100%, i.e. 9% a year, compound, every year for nine years, not simply a 10% uplift over ten years.
In light of what I said above, I hope it's clear that your reading of the situation is way off. (Fwiw, I don't say I am 100% right on every calc and nuance above - I am just an amateur. But I think it's broadly correct).Also it is not all about rising property prices it is also about managing the loans. So in the example above, where a field was bought for 13 million and is now worth 600K. If NAMA buys that loan for 660,000 they can renegotiate with the property developer. So they say to him give us 700,000 and your 13 million loan disappears. He sells the field for 600,000 sells other assets (if he has them) for 100,000. Now he has removed a 13 million noose from around his neck allowing him to carry on in business (assuming he still has a viable business) and NAMA has not only reached the "long term ecconomic value" of this loan but also made a profit on top of it.0 -
ILL TAKE area x, prices are between 160 and 180 on average for a 3bed semi.
if theres an eejit on the estate advertising 1 gaff for 240k,well than he wont even get anybody,looking at the gaff ,never mind putting in a bid.
IF YOU have a 280 mortgage ,and are now expecting say 260 ,well your wasting your time.we,ve seen approx 30 percent drop in the last 2 years .
WHEN people really want to sell a gaff a good estate agent ,will say eg its worth 170, you might get a bit more, say if theres like 3people interested in it.THATS COMMON SENSE.
you think theres some big conspiracy among agents to hide the true values .
OF COURSE theres some people who are putting overpriced houses on the market.
IF anything prices may be held up,cos nama can hold onto 100 thousand houses and keep them off the market.
JUST cos some houses are advertised for stupid prices that does,nt mean the market
is false or dysfuntional.
IF theres only one house for sale in a small village in wicklow
well then if you wanna buy it ,its harder to know an exact price cos theres not ten houses identical
for sale down the road.
ie people may pay more if its quiet,in a scenic area, with good transport links.
especially in wicklow where its very hard to get permission to build anything.
IF my gaff is worth 200k, and i advertise it for 260,well that just shows
i,m an idiot.OR else it shows i,m hoping some1 is foolish enough to pay 260.,60k over the market value.
I JUST FIND IT FUNNY when i see ten houses on an estate going 4 200k,
and then theres some eejit advertising another identical,semi d for 250k.0 -
Treehouse72 wrote: »1. Of course I knew that all loans over €5m were going into NAMA, whether performing or non-performing.
It is just when you said:
"if their loans are not being transferred to NAMA because they are bust, then why are their loans being transferred? Why would you transfer the loans of non-bust borrowers into an asset recovery vehicle? I'd appreciate if you could help me out on this."
I assumed you didn't know all loans over 5 million would be in NAMA. Sorry about that.Treehouse72 wrote: ».
. The clearest analysis I know on this is Peter Matthews':
http://bankermathews.com/nama-whats-wrong/
He is making the classic mistake of assuming that when NAMA values loans it will reduce each loan by exactly the same amount. Obviously this is totally inaccurate. Why do valuations if that is the case. He is saying if a loan was originally 100 million and is now worth 25 million NAMA will value it at 70 million. This is totally untrue. If it is now only worth 25% of its original value then NAMA will value it at 27.5% of its original value (25% +10%).
This is a fairly basic mistake but people are making it again and again. Obviously this makes the rest of his figures total rubbish.Treehouse72 wrote: ».
2. Firstly, on the quote you cite, when he says the valuations are lower than 30%, he means they are worse. They require a greater haircut than 30%.
Exactly. The loans are valued at todays prices which means a haircut of more than 30%. Probably 40-45% which means they only have to rise 10% not 35% as you were saying. So a loan with a book value of 100 million is now valued at 60 million and has to rise to 66 million for NAMA to make a profit. So 10% not 35%.Treehouse72 wrote: ».Second, I am talking about the projections made by Brian Lenihan when announcing NAMA and in the subsequent business plan. IT WAS AT THAT TIME that Mr. Lenihan said that for NAMA to break even property prices would need to rise 10% in 10 years. This was of a piece with the mooted haircut of 30% on aggregate across all the loans going into NAMA. The fact the actual valuations are only being done now doesn't matter except to the extent that they reveal how ridiculously optimistic the 30% figure was.
Again they were optimistic but they were only estimates. They can now be disregagrded as the real figures will be released within the next 2-8 weeks.Treehouse72 wrote: ».
And all this is above and beyond capitalisation needs. You say the market might cover that, I say this is delusion on an epic, epic scale. .
If you mean that the market will invest in AIBs shares then I agree with you. However this is not the point I meant. On Monday Davy Stockbrokers published an analysis of AIB and showed 2 different ways it could sell assets and cover its losses without having to go to shareholders never mind going to the government. Now obviously the could be wrong and have been wrong before but they are right more often than they are wrong.0 -
Wow. Are you serious? After reading the Matthews piece this is what you take from it?He is saying if a loan was originally 100 million and is now worth 25 million NAMA will value it at 70 million
Sorry, I'm done now. You are either being purposefully obtuse or you genuinely believe your post above. Either way, it is hopeless to continue the debate when you are so closed to improving your knowledge and so determined to argue your case no matter what I say. Your post above is total gobbledegook (sorry, I said I wouldn't be rude, but I can't help it.) You analysis of the Matthews numbers is simply incoherent. So let's leave our debate there.
You beat me off the battlefield. Congrats.0 -
IF anything prices may be held up,cos nama can hold onto 100 thousand houses and keep them off the market.
A difficult email to read, but this is the key problem. As long as somebody with a stake has sufficient liquidity to either a) price unrealistically as a withholding measure or b) outright withhold property from the sales/rental market then prices are being artificially inflated. But the owner MUST have sufficient liquidity in order to be able to do that either by a) having sufficient income from other sources or b) by not having borrowing on THAT property. As long as this is the case then it will remain in the interests of some "sellers" (whether sale or rental) to price at the price they want or withhold - it would be difficult to prevent this except through carefully targetted "vacancy" taxes designed to prevent owners from leaving places derelict rather than placing on the open market (or marketing but pricing at unfeasible levels).
That said, no measure has inflated the market as much as large-scale leveraging or subsidisation. The only "state assistance" measure that doesn't really inflate prices is council backed loan schemes (which are still quietly around) since they limit the price paid and don't subsidise the actual prices paid for the property.0 -
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Treehouse72 wrote: »Wow. Are you serious? After reading the Matthews piece this is what you take from it?
.
OK to explain it to you.
Mathews says the book cost of the loans in NAMA is 77 billion but NAMA is goingto pay 54 billion for it. (now I think we can all assume the cost is going to be less than 54 billion but lets leave it at that for the moment)
Now he says the performing loans make up 30.8 billion of this original 77 billion. Lets assume for the sake of argument that NAMA pays 85% of their book value for these loans (obviously you pay more for performing loans than non-performing) That means the cost of these 30.8 billion of performing loans is 26.18 billion.
That means NAMA is going to pay 27.82 billion for the non-performing loans (54 billion minus 26.18 billion). The book value of these non-performing loans is 46.20 Billion. So NAMA pays 27.8 billion for loans with a book value of 46.20 billion. All OK so far?
However Mathews is saying that these loans are only worth 25% of their original Value or 11.55 billion. So if they are only worth 11.55 billion and NAMA is doing valuations as we speak why does he believe NAMA will value them at 27.82 billion? That is his basic mistake.
You have to assume if the loans have a current value of 11.55 billion as he believes then that is the valuation NAMA will put on them.0
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