Economics of NAMA require new property bubble?

[HanleyS]

I'm a little bit concerned about this NAMA plan. When it was initially mentioned I thought that the cost would be fairly attributed to the banks and the property developers who took out the bad loans. As details emerge I'm not so sure.

The underlying assets against which these non-performing loans are secured have dropped in value by approximately 70 to 75 per cent based on figures quoted in the recent court appearances by Liam Carroll and John Fleming.

NAMA proposes that these loans be valued at a discount of 25 to 30 per cent based on the premise that the assets against they are secured will recover in value over the medium term.

Forgetting for a moment that no private firm would value the loans on this basis, this would require a new property bubble to reinflate prices to close to their bubble levels.

Even if the government were able to halt the unwinding of this property bubble and create a new bubble, it would take several years. NAMA will have costs in administering these loans over that period and also in servicing the debt. When these costs are added onto the original loan value it will require the final sale price of the loans/assets to exceed their bubble prices.

To be frank this is not going to happen, the taxpayer is going to end up paying for this one way or another. This plan is flawed from start to finish.

[JCR]

ACC were valuing the value of assets held though these loans at 25% of the total value of the loans themselves. NAMA only taking 25% off? That is a difference of half the entire amount. Its complete unreality and the fact is that FF are doing it again and this may even be a worse cock up than fueling the property pyramid.

[Jock_the_Waster]

It is the greatest financial theft from Irish citizens, many yet unborn, ever.

ZANU-FF will protect its friends at taxpayers expense.

It was never going to be any other way.

(I will say it for the last time, the banks must be nationalised otherwise the churn will sink us)

[Aindriu]

It is the greatest financial theft from Irish citizens, many yet unborn, ever.

ZANU-FF will protect its friends at taxpayers expense.

It was never going to be any other way.

(I will say it for the last time, the banks must be nationalised otherwise the churn will sink us)

I completely agree. The banks have been given a multi million Euro bailout yet are refusing to lend to ordinary citizens and small to medium businesses. The number of house repossessions are rising rapidly yet still not ONE developer has been in the dock to repossess their mansions used as sureity for their loans.

[BodyofEvidence]

A piece in the Sunday Times a number of weeks ago by Brian Lucey and Constantin Gurdgiv went through the NAMA finances in great detail. They constructed a spreadsheet model of it. Im sure if you email them they would send it

[cactusflower]

I agree with SHanley's OP.

The market is not going to return to the lunatic prices paid 2006-7, when most of the damage was done.

There was some kind of argument being put out yesterday to the effect that EU competition law required the valuations to be market based - but it was being used to justify not acquiring assets at less than market value - i.e. its O.K. to take on losses of developers but on no account could we counterbalance it by acquiring some assets with real value.

The disastrous Banks Guarantee ties us in to all of the losses anyway. Lenihan sneaked through a piece of legislation allowing extension of it in the last few weeks with very little comment. The Guarantee would have to go to give us any alternatives.

This is a ghastly stitch up of the rest of us by the rich and their bankrupt pals.

RTE's description of these bankrupts as "top developers" says it all.

[Breadan O'Connor]

I'm a little bit concerned about this NAMA plan. When it was initially mentioned I thought that the cost would be fairly attributed to the banks and the property developers who took out the bad loans. As details emerge I'm not so sure.

The underlying assets against which these non-performing loans are secured have dropped in value by approximately 70 to 75 per cent based on figures quoted in the recent court appearances by Liam Carroll and John Fleming.

NAMA proposes that these loans be valued at a discount of 25 to 30 per cent based on the premise that the assets against they are secured will recover in value over the medium term.

Forgetting for a moment that no private firm would value the loans on this basis, this would require a new property bubble to reinflate prices to close to their bubble levels.

Even if the government were able to halt the unwinding of this property bubble and create a new bubble, it would take several years. NAMA will have costs in administering these loans over that period and also in servicing the debt. When these costs are added onto the original loan value it will require the final sale price of the loans/assets to exceed their bubble prices.

To be frank this is not going to happen, the taxpayer is going to end up paying for this one way or another. This plan is flawed from start to finish.

This morning it was announced that foreign banks would also be covered by NAMA.

I presume this is to stop them pulling the plug on developers as Rabobank has already begun to do.

[cactusflower]

How much does this add to the bill, I wonder?

And what chance of ever recouping any of the losses ?

[Outlander]

Please rename the thread to "Politics of NAMA require new property bubble!"

[DCon]

FF are a one-trick pony, and raising property prices is that one trick.

Their pay-masters demand increased property prices and FF use the resources of the State to make it happen.