The Irish Times reported two interesting stories on Saturday which both raise questions about NAMA.
The first story concerned the re-valuation of two development sites. The first site in Athlone, Westmeath, valued at €31m in 2006 has just been re-valued at €0.6m (a drop of 98%). The second site in Sallins, Kildare valued at €17.5m at the market’s peak is now valued at €4m (a drop of 73%), holding up a little better in value one presumes because of its proximity to Dublin and its siting on a commuter rail line. As we’ve posted previously, these drops in valuation are not exceptions. City centre prime sites such as the 24.9 acre Irish Bottle Plant site in Ringsend bought for €412m in 2006 is, according to the Dublin Docklands Development Authority (DDDA), presently worth €50m (a drop of 87%), while its Long Term Economic Value (LTEV) is €62.5m. The national average price paid for farmland in 2009 was €9,678 per acre, a drop of 43.3 per cent on the average price of €17,081 per acre in 2008 (and this was on top of a drop in 2008). It therefore seems likely that both zoned and serviced development land and unzoned land in Ireland has dropped substantially in value, probably somewhere between 70-98% depending on the site and the original amount paid. 36% of NAMA’s portfolio is land, with loans worth €27.8b attached to them, and it is likely that a proportion of the ‘development loans’ category (28%, €21.8b) also consists of development land. 67% of NAMA portfolio relates to land and property in Ireland, and although we do not have details of the geographic location of all NAMA land holdings it is probably a fair bet that 67% or more of it resides in Ireland.
The value of land destined for management by NAMA then is likely to be far below the 30% ‘haircut’ the government has proposed to pay. It is difficult to see how a profit, one of the aims of NAMA, could be made with respect to land holdings over its proposed life span unless a 70-90% haircut is applied to the original loan valuation. It is also hard to believe that prices will rise back up to anywhere near 2005/06 prices any time soon given the grossly inflated prices paid for land at the peak of the market and the present supply of zoned land. As Sinead Kelly has posted on IAN, land values spiralled upwards in Ireland in the early 2000s, jumping in value from just under €10,000 per hectare in 1998 to over €58,400 per hectare in 2006 (see Figure 1), making Irish land the most expensive in Europe, nearly twice the cost per hectare of any other European country and 3 times greater for all but 4 countries (Spain, N. Ireland, Luxembourg, Netherlands) (see Figure 2). According to the DEHLG housing stats, in June 2008 there were 14,191 hectares of zoned, serviced housing land in the state that could accommodate 462,709 additional housing units (to put that in perspective, the number of households grew according to the Census by 342,221 between 1996 and 2006), and this doesn’t include other kinds of zoned land. Which brings us on to the second story.
Figure 1: Irish Land Values 1973-2006 (€ per hectare)
Figure 2: European Land Values by Country (€ per hectare)
The second story concerned the Waterford County Draft Development Plan which went on display on Friday and proposes to rezone 70-90 percent of the 800 hectares zoned in the previous plan, bringing it into line with changed circumstances, projected population growth and national and regional planning guidelines. According the Irish Times, one of the maps shows ‘large tracts of land, acquired in recent years by developers at astronomical prices, reverting to agricultural use.’ Such rezoning makes a lot of sense and Waterford should be commended for taking the lead, but it also raises a number of questions. Why was the zoning in the previous plan so excessive (and likewise in other counties)? Will such rezoning occur in other counties as they formulate their draft development plans? How much of the rezoned land is projected to be moved into the NAMA portfolio and what are the implications of any rezoning for its projected value? Will there be political pressure to make sure that it is NAMA land that is kept zoned to maintain some kind of value above agricultural prices? Clearly the answers to the latter questions will have an impact on the valuations attached to NAMA managed land and need to be factored into any calculation of present and future valuation.
As these two stories illustrate, there are good reasons as to why people are concerned about NAMA and whether it will be able to fulfil its remit. Already the IMF has noted that it is unlikely that NAMA will get credit moving in the Irish economy. If the valuations of land and property are wildly inaccurate, and the ‘haircut’ paid by the government is in excess of the true value, then NAMA could be a very expensive exercise that the Irish tax payer will shoulder for years to come. One can hope that government knows what it is doing, and maybe they can reassure on all the questions above, but one can’t help being worried pending such reassurance.
Rob Kitchin
Ireland after NAMA 
February 22, 2010 at 11:39 am
1. Is there any chance that someone could revisit this post here because it has a direct imppact on the facts in a coastal county like Waterford. I was promised an update a month back
https://irelandafternama.wordpress.com/2010/01/22/county-vacancy-rates/#comments
2. Many counties are afraid to ‘dezone’ land. The reasoning must be very well founded and wide based. Then again these speculators wer eonce well funded and litigous, and are now skint with banks chasing them.
They will not fight as hard as they once might have and counties have more breathing room in that respect.
Getting the dezone ‘right’ in one county is a necessity and many agencies could contribute to the rigour of the analysis.
February 22, 2010 at 12:38 pm
We said we’d try and take a look at the issue you want investigated, but did not promise to do so. As we explained at the time we have no capacity to undertake specific, individual research requests, and are all employed full-time on other projects which sustain our employment. We appreciate that you may find this disappointing, but we are not going to be able to fulfil your request.
February 23, 2010 at 8:31 am
“We appreciate that you may find this disappointing, but we are not going to be able to fulfil your request.”
I am only trying to get you to test your 300,000 empty house assertion against 2 out of 3400 Electoral Districts nationally and in a small part of coastal Donegal and which 2 EDs contain around 400 houses…or do they ??
Absent any FURTHER research by yourselves on Geodirectory versus Census data I do not believe that the 300,000 figure stands as an incontrovertible fact.
Those two electoral districts linked in my comment above contain a LOT of permanently emplaced mobile homes.
These need to be eliminated, then we are all getting somewhere.
I told you what to look for !!!!
February 23, 2010 at 9:24 am
Dr Brendan Williams at UCD has told me that their report into vacant property should be available by the end of the month (this week I guess) and will be online. It is expected to show well in excess of 300,000 vacant homes (plus holiday homes on top) and may well shed more light into the locations, condition and rationale for remaining vacant.
February 22, 2010 at 12:50 pm
“As these two stories illustrate, there are good reasons as to why people are concerned about NAMA and whether it will be able to fulfil its remit. ”
What remit is that Rob? The over-riding “objective” for NAMA, articulated by govt and opposition is to protect tax-payer’s investment. No metrics, no real mention of bank lending, no time-scales (10 years?). Is it not a bit grand therefore to assume there is a “remit”?
“Already the IMF has noted that it is unlikely that NAMA will get credit moving in the Irish economy. ”
Brian Cowen has said this is a 10-month old comment and the IMF are fully supportive of NAMA. It says something about the media and opposition that the IMF have not been quizzed about the apparent disconnect in their position.
“If the valuations of land and property are wildly inaccurate, and the ‘haircut’ paid by the government is in excess of the true value, then NAMA could be a very expensive exercise that the Irish tax payer will shoulder for years to come. ”
As Basil Fawlty would have said, Sybil you deserve a medal for stating the bleedin’ obvious. Careful about haircut though, it is the discount from the loan amount plus rolled up interest (loan amt is on avg 77% of orig asset value) to give the consideration being paid. The consideratioon being paid is the present value of the asset plus a long term economic value – that definition seems to have been blurred in the early part of your post.
“One can hope that government knows what it is doing, and maybe they can reassure on all the questions above, but one can’t help being worried pending such reassurance.”
The US and Britain knew what they were militarily doing with the invasion of Iraq, though everyone seems to acknowlege there was either a complete lack of post-invasion planning or it was effected abysmally. Either way, do you think the selected financial minds in a 4.5m marginal state (call a spade a spade) are to be trusted to implement such a project when there are so many vested interests and so few safeguards. My point is even the super-powers get things badly wrong.
Lastly, any view on lobbying govt to pare back the initial NAMA tranche to below €1bn and hold a quick review to ensure valuation methodology and modus operandum are appropriate?
February 22, 2010 at 1:20 pm
Congratulations to the Waterford planners for stepping up to reality. This was the course laid out by An Board Pleanala last fall and one that is consistent with Minister Gormley’s observations. Now for the important question: Will other local councils step us and do the same thing?
February 22, 2010 at 3:56 pm
Ther will be no rezoning in Biffoland!
“PROPOSALS by Offaly County Manager Pat Gallagher to dezone the eastern part of Tullamore but to continue to allow construction in the western part were rejected during a heated meeting of Offaly County Council.
An amendment put forward by the Fianna Fáil group proposed that the existing zonings remain. ”
This gives the green light to build on a flood plain
February 22, 2010 at 4:40 pm
While it appears that Waterford maybe going in the right direction, a lot can happen between now and when the plan is ultimately adopted, it is only in ‘Draft’ format, so we shouldnt lose the run of ourselves, it could change significantly before final adoption by Councillors. Solving the overzoning problem will not be as a result of one-off grand gestures but a systematic and long-term change in approach / mindset long after the issue has lost its current media attention. The question also arises as to what difference zoning makes. Aside from the optics of dezoning, or lack thereof, it appears that zoning has to a large degree lost much of its relevance. Once upon a time, if land was zoned, the principle of the development was not questioned. Nowadays, zoning is only one of a long list of criteria, and often wouldnt be at the top of the list for that matter. There is more and more evidence of zoning being sidelined in planning decisions, particularly at An Bord Pleanála level. The zoning concept is flawed, much like the CAO system would be if everyone got 600 points in their leaving certificate. It appears that the powers that be have tried to cope with this by introducing parallel systems such as national planning guidelines (issued by the Minister for Environment) which are now given much greater weighting in many cases than zoning. Isn’t it time we stopped fooling ourselves (and Councillors into thinking they have an important role) and introduce a proper, fit for purpose, planning system. Gormley talks the talk, but will he walk the walk.
February 12, 2011 at 12:02 pm
This is full of information but who are you?
February 15, 2011 at 8:37 pm
If this is directed to me personally – Rob Kitchin, then I’m director of the National Institute for Regional and Spatial Analysis at NUI Maynooth. If the question is about the blog, then we’re a collection of mostly geographers and some sociologists based in a number of Irish universities.