NAMA - Trying to inflate that conmstruction bubble

Fr Tod Umptious

News this morning is that NAMA are going to loan 2bn to developers to complete commercial and resedential projects

http://www.rte.ie/news/2012/0523/nama-to-invest-2bn-creating-jobs.html

RTE wrote:

The National Asset Management Agency has announced proposals to invest €2bn in Ireland over the next four years.

The Chairman of NAMA Frank Daly has said that the investment could generate 25,000 jobs in construction and an additional 10,000 jobs in the wider economy.

He said that the figures are based on two studies, one from the Department of Finance in 2010 and one from the Construction Industry Council in 2009.

The money will be used to complete commercial and residential projects and to develop future green field sites.

90% of the agency's Irish property assets are located in the greater Dublin area and in Cork, Limerick and Galway.

NAMA will also launch at least one Qualifying Investor Fund this year, to attract big institutional investors.

The agency has said that there is an 80:20 deferred payment initiative for residential mortgages which has generated €8.4m since the pilot phase was launched two weeks ago.

Rental income is being generated from over 9,000 residential units in NAMA.

Frank Daly said that NAMA is "cautiously positive about the property market, we think that the economy and some of the important property segments have turned the corner."

He said that having analysed all the business plans of NAMA's debtors, he belived that two thirds of our debtors will be working with NAMA and that they can have a commercially viable future, and he considered that a very positive outcome

It was said that when NAMA was setup that the only way for it to be a success was if it inflated the property bubble again, just the thing we were trying to get away from, and this seems to be some indication of it.

I know there are properties built in the wrong place that will never be sold, and properties that are in the right place and worth something, but I'm still not sure there is enough demand out there for more commercial and residential units.

Plus the banks are not that willing to give out loans any more, sow here are the buyers going to come from.

An odd move in my eyes, will be interesting to see how it pans out.

ardmacha

The title of this thread is nonsense. Some construction is not a bubble. Ireland presently has much less construction that you would expect and finishing off properties is a wise move. The only thing that you can say about this is question the location of these schemes.

lmimmfn

and to develop future green field sites

This is what i have an issue with, other than the Childrens hospital what new buildings does the country need?

Dob74

NAMA can get revenue by dropping the price of what they are selling.
Living in Cork City I can count a least 100 houses and about 500 apartments lying idol since 2007. The developer, than the bank and now NAMA dont want to sell them at market price but wait til the prices bounce back.

The most frightening thing about NAMA is they made a profit last year when property prices fell by 17%. Would love to know how they managed this?

I am sure they have the same accountants as the banks used from 2000to08.
Very reliable chaps.

Frank Daly is sounding more and more like Sean Fitzpatrick pre bubble.

Fr Tod Umptious

lmimmfn wrote: »

This is what i have an issue with, other than the Childrens hospital what new buildings does the country need?

Same here

Yes there are unfinished developments worth finishing but I would be surprised if there was a shortage of housing or commercial stock, in any area, that would necessitate the building of new units on greenfield sites.

Sleepy

Honestly, I can see some potential for this in Dublin. There's a few un-finished estates of semi-d's up behind Clarehall that if they were priced right I'd consider (assuming I could get mortgage approval), tbh.

It all comes down to price I think. Obviously there's no demand for Celtic tiger apartments in the midlands (nor will there ever be again hopefully) but good quality houses at a reasonable price in Dublin will sell.

Fr Tod Umptious

Dob74 wrote: »

NAMA can get revenue by dropping the price of what they are selling.
Living in Cork City I can count a least 100 houses and about 500 apartments lying idol since 2007. The developer, than the bank and now NAMA dont want to sell them at market price but wait til the prices bounce back.

The most frightening thing about NAMA is they made a profit last year when property prices fell by 17%. Would love to know how they managed this?

I am sure they have the same accountants as the banks used from 2000to08.
Very reliable chaps.

Frank Daly is sounding more and more like Sean Fitzpatrick pre bubble.

Well that's not that much of a mystery and I would not read that much into it.

They sold the 'low hanging fruit',
The good properties in the right areas, many abroad, and thus they did well out of it and fair play for them for making a profit

The problem now and down the line is how to get rid of the less desirable properties.

later12

There is a similar over-reactive antipathy to construction in this country as there was to the banned foods that gave rise to the Jewish kashrut. A dramatic exposure to the dangers associated with certain goods leading to an awkening of excited, irrational fury against that product.

There's nothing wrong with construction as an industry. There's nothing wrong with maximising your profit from building houses. There's nothing inherently wrong with lots of money.

This goes further than the construction industry, and right into the macroeconomy. Entrepreneurship has taken a serious hammering in this country, and is continuing to do so in light of the banks and the SME sector. In an era where progress and economic development are of major importance, I fear Ireland is in for a long run of conservative, anti-development superstition where anything but the humblest of economic policies or business projects will be popularly derided.

I'd love to be proven wrong on this, but I think there is a genuine danger that Ireland is in no hurry to get back on the horse from which it has fallen, and it's possible our economy will be the more wobbly for it for some time.

Fr Tod Umptious

later12 wrote: »

There is a similar over-reactive antipathy to construction in this country as there was to the banned foods that gave rise to the Jewish kashrut. A dramatic exposure to the dangers associated with certain goods leading to an awkening of excited, irrational fury against that product.

There's nothing wrong with construction as an industry. There's nothing wrong with maximising your profit from building houses. There's nothing inherently wrong with lots of money.

This goes further than the construction industry, and right into the macroeconomy. Entrepreneurship has taken a serious hammering in this country, and is continuing to do so in light of the banks and the SME sector. In an era where progress and economic development are of major importance, I fear Ireland is in for a long run of conservative, anti-development superstition where anything but the humblest of economic policies or business projects will be popularly derided.

I'd love to be proven wrong on this, but I think there is a genuine danger that Ireland is in no hurry to get back on the horse from which it has fallen, and it's possible our economy will be the more wobbly for it for some time.

Yes that's true that 'building' and 'construction' now seem to be taboo subjects in Ireland after what happened, and yes it could be seen that there is an overreaction to it.

But the problem is that there is no credit out there, so even if people wanted to build and buy the banks are reluctant to finance them to do so.

So what is the use in trying to pump funds in to the supply side of the business when the banks will not help fund the demand side.

ardmacha

So what is the use in trying to pump funds in to the supply side of the business when the banks will not help fund the demand side.

NAMA has offered mortgage deals with other properties.

antoobrien

Fr Tod Umptious wrote: »

But the problem is that there is no credit out there, so even if people wanted to build and buy the banks are reluctant to finance them to do so.

So what is the use in trying to pump funds in to the supply side of the business when the banks will not help fund the demand side.

I wonder how much of it is "no credit" and how much is "no realistic business plan". When I hear cries for normal lending, I hear people wanting to get back to no credit checks etc. What is happeneing now is closer to "normal lending" than anything that happened over the past 10 or so years.

who what when

This must be the worst thread title ever!
The bubble well and truly burst in 2008!

Mr.Micro

NAMA - Trying to inflate that construction bubble

That was the impression I got as well, watching the slot on the news. NAMA have now turned into estate agents, with the double speak BS that goes with them. Maybe the Chinese will be interested in buying the properties. The green field sites bit, after all the massive over development. The County Councils and planners will be rubbing their hands with glee.... again, all the possible bribes, and no planning rules. NAMA should sort out all the ghost estates and abandoned houses, not just cherry pick and and make a few more developers rich, maybe its even the employed developers it retains on 200k+ each a year, a double bonus?

Fr Tod Umptious

who what when wrote: »

This must be the worst thread title ever!
The bubble well and truly burst in 2008!

Christ almighty - we can change the title of the thread if people wish but my interest is in the fact that NAMA are trying to get developers building again when it seems like there is still oversupply in the market
And my recollection that at the time it was being setup some (then) opposition TD said that the only way it would be successful was if we went back to an bubble situation.

Sorry for getting people so upset with my choice of thread title

Mr.Micro

Fr Tod Umptious wrote: »

Christ almighty - we can change the title of the thread if people wish but my interest is in the fact that NAMA are trying to get developers building again when it seems like there is still oversupply in the market
And my recollection that at the time it was being setup some (then) opposition TD said that the only way it would be successful was if we went back to an bubble situation.

Sorry for getting people so upset with my choice of thread title

You are perfectly right Tod, Nama are trying to ignite the property sector, albeit the commercial sector. Its looking out for itself and its clients (developers), and the taxpayer eventually.

MadsL

Fr Tod Umptious wrote: »

I know there are properties built in the wrong place that will never be sold, and properties that are in the right place and worth something, but I'm still not sure there is enough demand out there for more commercial and residential units.

..there is also the question of if the apartments are up to fire regs and size requirements.

‘Toxic bank’ NAMA has dramatically been refused permission to complete the Gateway Galway shopping and residential complex off the Western Distributor Road.

The groundbreaking decision is understood to be one of the first planning refusals of its kind in the country.

The National Asset Management Agency had sought a five-year extension of time to complete the development, which is anchored by Dunnes and B&Q and commonly known as the Knocknacarra Shopping Centre.

City planners rejected the application on the grounds that 131 apartments which form part of the plan no longer meet planning guidelines.

http://www.galwaynews.ie/25880-planners-sink-nama-plan-finish-major-city-complex

Sleepy

TBH, more apartments is the last thing that area needs. Far too many "starter homes" there already.

murphaph

Dob74 wrote: »

NAMA can get revenue by dropping the price of what they are selling.
Living in Cork City I can count a least 100 houses and about 500 apartments lying idol since 2007. The developer, than the bank and now NAMA dont want to sell them at market price but wait til the prices bounce back.

The most frightening thing about NAMA is they made a profit last year when property prices fell by 17%. Would love to know how they managed this?

I am sure they have the same accountants as the banks used from 2000to08.
Very reliable chaps.

Frank Daly is sounding more and more like Sean Fitzpatrick pre bubble.

NAMA owns lots of foreign property (especially UK) too. London has seen prices surge as the Greeks buy up all in sight.

That's where they're making any profits.

Icepick

The problem isn't construction activity.
The problem is that the government continues to distort the market and funnel people's money into projects selected by committees and not market needs.

the groutch

NAMA is about getting the best return for us, the taxpayer.
If they have half-finished developments, surely it's more profitable to finish the job and sell them on, rather than try selling as is, or worse yet buldoze what's there already and just be selling a plot of land.
And if they're taking thousands of people off the dole, all the better.

Icepick

the groutch wrote: »

If they have half-finished developments, surely it's more profitable to finish the job and sell them on, rather than try selling as is, or worse yet buldoze what's there already and just be selling a plot of land.

No, it's not if it's done inefficiently.

the groutch wrote: »

And if they're taking thousands of people off the dole, all the better.

Not really. The taxpayer is still paying their income.

2 billion would be better spent on infrastructure or business start ups

Nothingbetter2d

nama have lots of unfinished building sites... this means those sites are unsellable in their current form and also unrentable

the 2bil is to get them finished so at the very least they could rent the properties and actually start contributing towards paying off the bank debts.

with loads more rentable properties on the market the cost of rent will drop as there will be far more available to choose from.... this in turn will allow the sw to reduce the RA allowance inline with reduced rent costs.

Sleepy

Option A: sell unfinished estates as they are and let developers who buy them cheap and finish them off turn a profit

Option B: NAMA invests in those estates and the taxpayer gets the benefit of any profit.

I know which option I'd pick tbh.

K-9

The problem for developers is getting banks to finance them. They might pick up the unfinished estates cheaply but it would still cost significant sums to finish them and banks would be very slow lending to developers in the current market.

ardmacha

No, it's not if it's done inefficiently.

if people believe it is being done inefficiently then point out in what way this is happening, rather than generalisations.

Not really. The taxpayer is still paying their income.

The taxpayer may be paying their income, but if the developments are finished and sold then the taxpayer will get this back.

Sleepy

Not everyone needs finance to embark on a project like that.

And once the business plan was sound (i.e. not based on crazy sale prices), I don't see why a lender wouldn't get behind it tbh.

K-9

Sleepy wrote: »

Not everyone needs finance to embark on a project like that.

Indeed. I think a couple of unfinished estates did go on the market, never heard how they did.

And once the business plan was sound (i.e. not based on crazy sale prices), I don't see why a lender wouldn't get behind it tbh.

Yep, but they aren't lending to construction which is the problem. I don't see any evidence they are.

djpbarry

lmimmfn wrote: »

... what new buildings does the country need?

I can’t believe that’s a serious question? Ireland doesn’t need any new buildings?

Dob74 wrote: »

The most frightening thing about NAMA is they made a profit last year when property prices fell by 17%. Would love to know how they managed this?

Because they acquired some very valuable sites and properties? Case in point:
http://www.rte.ie/news/2012/0504/chelsea-bid-for-nama-owned-battersea-power-station.html

Fr Tod Umptious wrote: »

... there is still oversupply in the market

That really depends on what market you’re referring to. Sure, there is definitely over-supply in the “Apartments in the middle of nowhere” market, but I wouldn’t be so sure about, for example, flats in the centre of Dublin.

Deleted User wrote: »

2 billion would be better spent on infrastructure or business start ups

Neither of which fall under NAMA’s remit.

The bottom line here is that NAMA is doing pretty well and it is not at all far-fetched that, ultimately, shock, horror, it will actually turn a profit for taxpayers. How this is being portrayed as a bad thing, or something to be wary of, is beyond me.

Do people actually want Ireland to recover? Or will that mean that people will start running out of things to moan about?

Icepick

People still blindly believe that the government knows best how to spend their money. What kind of a lesson greater than a bankrupt economy do they need?

djpbarry

Icepick wrote: »

People still blindly believe that the government knows best how to spend their money. What kind of a lesson greater than a bankrupt economy do they need?

This money is being spent to upgrade assets that are currently unsaleable and, therefore, useless to everyone including taxpayers. Admittedly, I've not seen the details, but on the face of it, it seems to me like a good idea. Even if it only generates a very modest return on investment, it will at least mean that derelict and/or abandoned sites will be cleaned up.