“Davy said the banks’ Irish landbank loans were the riskiest category, where it was pricing in a 44pc writedown on transfer. This was based on the assumption that valuations here would plunge 76pc from their peaks”
If NAMA is indeed assuming a 76% reduction in nominal terms (i.e. inflation unadjusted) from the peak (assume Summer 2007) does that not give the public some valuation criteria ?
It is a savage number.
It is certainly well pre-2000 prices in chronological terms.
Or are the landbanks we are talking about representative of residential property ?
Looking at the graphs it puts prices back to 1997.
According to the Swedish experience (Agneta Jacobsson) this intervention / revaluation by a State agency (i.e. a monopsony) is what is required to get us out of limbo and get transactions moving again.
Swedish property prices pretty much remained static after that point.
A key question is what happened everyone underwater, but I dont think they had near the level of price appreciation that we had.
Frankly, I wonder who’d even pay 24% of the original cost for many of the landbanks. I think for NAMA’s stock of land you are looking, on average, at 76% AT LEAST.
OP also asked if 76% was excessive for residential property - in my opinion, yes, it’s a wee bit high if we’re talking about Dublin non-apartments. Apartments maybe, but houses I don’t think it’ll be that much.
But OP also has a very good point: at long, long last at least this is some kind of ballpark indication of the scale of the problems.
I’m not so sure a 76% drop on residential prices (including houses) in Dublin is so ludicrous.
Specific example: Extrapolating prices it would put a nice 3-bed semi-d with a large garden, Sandyford, say close to the Luas at about 180K.
(They’ve already dropped from 720 to about 400)
180K is comparable to Stockholm prices
I’m willing to take on board the point about apartments, but I think the very top end of the market will be most hit, as its prices in 2007 were most tied to the rosy 5-10 year view of the economy (and less to interest rates and affordability). They’ve been the hardest hit so far in terms of asking prices, and anecdotally were also the most likely to achieve significantly above their asking price in the good ol’ days.
I’ll see if I can dig up some stats that might help me make my point better,
No. None whatsoever. The biggest bustiest deals have almost no developer equity involvement from what we have learned in the meejia.
Davy’s appear to have broken their random number generator. They lowered all the bullshit tolerances during the boom and they appear to have forgotten to raise them again, hence they are producing reams of shite that only serves to reinforce people’s opinions of them as vested interests (vested in the banks getting off lightly). They appear to be alone in thinking the haircut will be 15%. Their delusion appears to be that the government does not want majority ownership of the banks. Nothing could be further from the truth in my opinion. The government would dearly love to own the banks. It would be hugely popular at this stage. So the government will screw the banks to the wall on the valuations in an effort to get as much control of the banks as they want (leaving a bit of room for more recapitalisation next year).
Just had a look at a couple of simple averages for properties in a couple of areas, comparing the last six months with Q3/Q4 2006. Rathfarnham 3-beds down 11%, Balbriggan 2-beds down 19%, Killiney 4-beds down 35%. Seems to support the idea of a well curve of falls, i.e. at the top and bottom ends of the market, with the middle holding out better.
Those are indeed only asking prices and the relationship between asking and closing prices may vary by area/position on the spectrum.
Trust me, if I’d actual sales data, I’d certainly post them! I guess I’m saying we might as well use a large volume of asking prices as an indicator of some merit (and one can apply one’s own discount between ask and close), in the absence of a decent sample size of closing prices.
“Just had a look at a couple of simple averages for properties in a couple of areas, comparing the last six months with Q3/Q4 2006. Rathfarnham 3-beds down 11%, Balbriggan 2-beds down 19%, Killiney 4-beds down 35%. Seems to support the idea of a well curve of falls, i.e. at the top and bottom ends of the market, with the middle holding out better.”
Regarding South Dublin I concur, and furthermore it is no surprise.
(1) The bottom end (commodity properties in Dublin) is one of the few areas that has actually seen some level of activity.
When there is activity by definition you will see prices dropping faster.
But at least these properties are liquid (punters wanting to avoid the commute)
(2) The middle end hasnt moved as much simply because there is less activity there.
Mt Carmel, Mt Merrion etc the properites are simply sitting there.
(3) The top end (e.g. 7 Louvain, Killiney addresses etc) have seen huge drops.
This is no surprise as the richest suffered the most in the minibudget - their affordability is most hit.
That was my point. All we can really tell in this area is that asking prices are sticky, indicating lower pressure to sell or higher levels of denial. TBH I think trying to extrapolate any trend right now (other than asking price stickiness) in this market is a fairly futile effort, until there are sufficient transactions, it’s really just a guessing game.