Nama uncertainty has paralysed the development property market

[cyberianpan]

Whether you are for or against Nama it is clear that it is unclear whether it will succeed. A new report has found that the development market is paralysed due to it and there remains a large overhang of unsold properties:

Irish Times Nama issue 'paralysing' building

Uncertainty over how the National Assets Management Agency (Nama) will function and the time being taken to set it up has caused “effective paralysis in the industry,” according to a new report.

I think this uncertainty is also spilling over into the retail market. We now are in a very bad position - and stuck there- Nama appears to be a lug weight which is depressing activity. This activity is needed to allow the correction to bottom out.

To my mind Nama has 2 critical areas of uncertainty:

1 ) Pricing: how are they going to price illiquid , toxic loans and associated security ?

2 ) Legal: the loan agreements are between the development companies & the banks, each agreement is unique and may preclude transfer to another agency.

Given the fact that it appears to be introducing more uncertainty - and paralysis - is it time to perform last rites on Nama and go for nationalisation ?

cYp

[Schuhart]

Given the fact that it appears to be introducing more uncertainty - and paralysis - is it time to perform last rites on Nama and go for nationalisation ?

I think we need to disentangle two things here. There's NAMA on the one hand. And then there's the fact that so much property has been built that there's no need to build any more.

There's absolutely no need to wait for NAMA to drop prices and clear the existing stock.

Is the suggestion that insolvent builders are waiting to see if NAMA will buy their existing stock for an inflated price? Of course, in fairness, that probably is FFs plan.

But I don't see nationalisation as the alternative. Just let the banks go, and the developers with them.

[Lefournier]

Whether you are for or against Nama it is clear that it is unclear whether it will succeed. A new report has found that the development market is paralysed due to it and there remains a large overhang of unsold properties:

I think this uncertainty is also spilling over into the retail market. We now are in a very bad position - and stuck there- Nama appears to be a lug weight which is depressing activity. This activity is needed to allow the correction to bottom out.

To my mind Nama has 2 critical areas of uncertainty:

1 ) Pricing: how are they going to price illiquid , toxic loans and associated security ?

2 ) Legal: the loan agreements are between the development companies & the banks, each agreement is unique and may preclude transfer to another agency.

Given the fact that it appears to be introducing more uncertainty - and paralysis - is it time to perform last rites on Nama and go for nationalisation ?

cYp

Construction / development is paralysed because we had a vast, sustainable explosion of development without a corresponding growth of the real economy. NAMA may prove to be a cure; it is not the disease.

[cyberianpan]

I think we need to disentangle two things here. There's NAMA on the one hand. And then there's the fact that so much property has been built that there's no need to build any more.

There's absolutely no need to wait for NAMA to drop prices and clear the existing stock.

The problem is that the banks are scared to call in the loans, they've been happier to roll interest & all sort of tricks

The developers don't want to admit bankruptcy

If the stash of property they are sitting on was forced to be released (to part repay the loans) - we would then see the necessary downwards correction

But Nama just has everything in stasis right now ... as long as the State guarantee is there : we need some State solution to get us out of this hole ... and I wonder how long can we afford to wait for Nama ?

Even if people knew that Nama was going to work & how it would work: then we could start operating on that assumption, right now everything is in limbo ... even a slightly worse plan, but one that looks feasible and with buy in, would be preferrable at this stage

cYp

[steady on now]

I think we need to disentangle two things here. There's NAMA on the one hand. And then there's the fact that so much property has been built that there's no need to build any more.

There's absolutely no need to wait for NAMA to drop prices and clear the existing stock.

Is the suggestion that insolvent builders are waiting to see if NAMA will buy their existing stock for an inflated price? Of course, in fairness, that probably is FFs plan.

But I don't see nationalisation as the alternative. Just let the banks go, and the developers with them.

If you let the banks go then the state has to either pick up the tab for any depositor with money in the bank or else not stand over its guarantee and leave the depositors lose their savings. Either way Joe Soap loses out.

Any person in the country who has a euro in the bank does not have it sitting there in a safe waiting to be taken out That euro has been lent on by the bank, much of it to developers.

Even if they decide to just let the really bad banks go then that would just cause a run on the remaining ones. Imagine the panic if it went around that say Anglo Irish bank depositor could not withdraw their funds.

I would have no problem with letting the developers go bankrupt if that is what is best for the country. NAMA may be the way to do this. But the banks are needed for the economy to function.

The whole idea as I see it is to hope that some of the developments can come right or at least improve in time(10 to 15 years). The economy can't wait that long and needs functioning banks now. The state can take on these debts and work through them over 10 to 15 years.

[cyberianpan]

I would have no problem with letting the developers go bankrupt if that is what is best for the country. NAMA may be the way to do this. But the banks are needed for the economy to function.

Mmmmm - I've read some of the "loan" agreements with the banks for some of the larger developments.

Very complex legal arrangements , the developers are often only a small part of it , with private investors often taking part in a holding company.

The loans themselves are a bit more like investments than loans

It is not at all clear who would go to the wall, as on some of the agreements I've seen there was very little cushion by way of additional security beyond the development itself ... the "billionaire" developers seem not to have had billions ...

But back to main point : the government need to convince all that Nama is the "happening thing" - else paralysis until (if) it happens will remain.

If they can't convince us that Nama is the "happening thing" by say the end of June: they should can it & go for the consensus option (nationalisation)

cYp