House prices down by up to 43% from the peak

[tonic]

OK, happy to agree with you on all this - but don't know how to change the title thread! Mod?!

@MPB, daft economist had an article in the Irish Times in September talking about this very issue:
The importance of getting NAMA’s core assumptions right
It contains this graph which shows the market rebound needed by 2020 for NAMA to break even...

There was a basic error with that graph, which Ronan Lyons admitted at the time in that he based his figures on the full 54 billion being paid regardless of what the final outcome actually was.

Two other things also need to be taken into account,

1. The 47% discount off peak was an estimate not a hard figure, based on the market at the time and on the asset security on the loans being as good as the banks said it was. What the actual discount will finally be we won't know until all the loans/assets are individually valued based on the market at the time of the valuation.

2. The graph assumes that the peak value of the developments was 88 billion less 47% arriving at 47 billion payment from NAMA. My reading of it would be that the 88 billion represents the total development costs of the underlying assets, not the peak selling value of those assets. That being the case you would have to add a margin for the developer to arrive at the planned selling price, this margin would vary but 25% would seem a reasonable average to me. This would give you a peak selling value for the assets concerned of approx. 110 billion and it's from this figure that any fall in market value should be calculated.

On this assumption and unless I'm missing something obvious, average property values would have to fall 58% plus before NAMA would need more that a 10% long term value lift.

[Dunlin3]

On what basis ?

Are you saying that house prices in the Uk would rise massively of they got rid of Council tax ?
You data to back this up is where exactly ?

Afordability. People will have to factor in property taxes when they calculate what a house will cost each month. Also mortgage interest relief will be phased out. For years people have been factoring this in, allowing them to borrow more. With property taxes and no interest relief people won't be able to borrow as much and prices will drop further.

[Scorpio]

There was a basic error with that graph, which Ronan Lyons admitted at the time in that he based his figures on the full 54 billion being paid regardless of what the final outcome actually was.

As I read it, it's not based on the assumption of €54bn, it's based on the assumption of long-term economic value being 15% above the current market value, whatever that market value is, as per Pat McArdle: The Irish Economy Blog Archive McArdle: 15% = 0%
See also the third part of the blog post with the graph.

Where did Lyons admit this 'error'?

[odie1kanobe]

Afordability. People will have to factor in property taxes when they calculate what a house will cost each month. Also mortgage interest relief will be phased out. For years people have been factoring this in, allowing them to borrow more. With property taxes and no interest relief people won't be able to borrow as much and prices will drop further.

Really so the data from UK suggests otherwise as the got rid of Mortgage Relief and made no difference to prices, they change from rates to individual community charge and then council tax and it didn't impact on house prices.

Exactly where is yoru evidence from ?

[Dunlin3]

Really so the data from UK suggests otherwise as the got rid of Mortgage Relief and made no difference to prices, they change from rates to individual community charge and then council tax and it didn't impact on house prices.

Exactly where is yoru evidence from ?

The UK got rid of mortgage relief quite a while ago now, about 10 years if I'm not mistaken. Also UK house owners were always paying some kind of property tax but in Ireland we haven't since 1977 so you can't really compare the two countries. We'll just have to wait and see!

[tonic]

As I read it, it's not based on the assumption of €54bn, it's based on the assumption of long-term economic value being 15% above the current market value, whatever that market value is, as per Pat McArdle: The Irish Economy Blog Archive McArdle: 15% = 0%
See also the third part of the blog post with the graph.

Where did Lyons admit this 'error'?

For NAMA to break even LTEV only has to be 10% above the current market value, the banks only get their last 5% is it goes to 15% above.

He said this on the Irish economy blog the afternoon of his article in the Irish times and possibly on his own blog as well.

[Dreaded_Estate]

For NAMA to break even LTEV only has to be 10% above the current market value, the banks only get their last 5% is it goes to 15% above.

He said this on the Irish economy blog the afternoon of his article in the Irish times and possibly on his own blog as well.

Wasn't that based on the fact that the €47bn property values would only have to increase by 10% to cover the €51bn paid to the banks?

[Simbo67]

For NAMA to break even LTEV only has to be 10% above the current market value, the banks only get their last 5% is it goes to 15% above.

He said this on the Irish economy blog the afternoon of his article in the Irish times and possibly on his own blog as well.

Any chance of that link?

[drjimryan2]

the real shock is that mr&mrs average, who purchased a 'starter' home in the north/south/west suburbs are about 140k in neg equity............and lets not even think of the 100% mortgages or the top-ups.........

[odie1kanobe]

The UK got rid of mortgage relief quite a while ago now, about 10 years if I'm not mistaken. Also UK house owners were always paying some kind of property tax but in Ireland we haven't since 1977 so you can't really compare the two countries. We'll just have to wait and see!

So you now are freely admitting there is Nothing behind your claim that a property tax and reduction of mortgage relief would impact prices.