Nama is proposing a curious valuation method for property assets.
The so called " long term economic value "
On News at One Lenihan revealed this to be something like:
The graph / trend of property value excluding the bubble, and that he had data from 1974 to extrapolate value
So he'll take as baseline say 1998, and then just do 6% compounded every year ?
Does this make sense ? Also should it try to take account of the global recession ?
cYp
"Yawn , am I alive yet ?"
It would make a lot more sense to chop up some poultry, toss the remains in the air and carefully examine the entrails.
It's Alice in Wonderland: " long term economic value " is whatever you want it to be.
Apart from that NAMA is going to consolidate huge power in the Minister of Finance and is not subject to the FOI.
Rather than sarcasm I think we should try to figure out what they are on aboutOriginally Posted by PaddyJoe McGillycuddy
I'm actually curious...
cYp
"Yawn , am I alive yet ?"
If fairness I think a bit of sarcasm is warranted. How does anyone make an even half worthwhile guess as to what a wide range of irish property assets will be worth in 3, 5 or 10 years time? Very few ecomomists predicted the extent of the crash with any accurarcy and I don't believe there is any remotely reliable method of predicting what's going to happen in next few years.
I nearly crashed the car when I heard Lenihan say the value would be calculated on the basis of the rise in values since 1974...he mentioned something about excluding more recent rises...but even if they go from 1974 to 2002 that will over value this property massively.
All this suggests that prices will return to normal within a short period, but as I understand it property prices in Japan are still below what they were in 1990 when their bubble burst.
These properties should be bought by NAMA at a big discount and if that means banks need more capital, so be it but it should come with extra tax payer ownership and rights, so when the upswing comes we win not the shareholders, developers and investors who are getting all the upside and no downside as far as I can see.
Quimby can't be trusted-Vote Sideshow Bob for Mayor
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The main objective of NAMA is to avoid having to assign true market values to the securities given against developer loans. If market forces were allowed to operate all the banks would be insolvent. So "long term economic value" is a concept which allows the Minister to justify overpaying for the bank's bad loans.
Exactly stonethrower. This long term economic value bolloxology is a distraction from the fact that anything we pay above the market value for these assets will constitute free money for the shareholders and bondholders of the banks. Whatever we get back for the assets in 20years time must be offset against this initial overpayment.
I would have thought it was a fairly straight forward process.
By looking at the normal influences on property prices in a stable market, national wage rates, affordability, expected demand, basic build cost, location and so no and then by using these factors in combination with the historical record and international experience in similar situations.
NAMA’s entry into the equation will in itself help stabilise the property market as they will not be under anything like the same pressures to lower prices as are the present owners of the available property.
I would welcome this news if the trend were smoothed out to exclude the bubble and hence represent the true long term economic value. I don't readily have the data in front of me but I would think that the bubble period would have started pre 2002 and possibly as early as 1997. While economic growth may have been healthier in the 1997 to 2002 period that the Celtic Tiger reigned, there was still evidence of detachment from reality in the housing market with a huge upturn in demand unmatched by supply. I do fear however that this will make the economics of NAMA unworkable as the losses will be too high to sustain.
The future saviour of the Irish Economy:
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Bubble period inflation was dependent on bubble economics and hence unsustainable post bubble. Therefore bubble period inflation is irrelevant to this calculation process. Bubble period inflation will be similar to post bubble deflation smoothed in a similar fashion to that applied to property prices.
The future saviour of the Irish Economy:
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