COMMERCIAL PROPERTY prices in Ireland have “over-corrected” and now offer attractive yields to investors, National Asset Management Agency (Nama) chief executive Brendan McDonagh has said.
“The yields at the moment are the highest since 1995, but that is because commercial prices have fallen by 55-65 per cent,” he told the Chartered Accountants Ireland London Society.
Some commercial properties now offer an 8.5 per cent yield, compared with a post-1995 average of 6.25 per cent.
Illustrating the collapse in the Irish property market, he said there were €3 billion worth of commercial deals, €4 billion of speculative land transactions and €39 billion of mortgages in 2006.
“Last year, you had €200 million worth of commercial transactions, €28 million worth of land transactions and €2.5 billion worth of mortgages,” he went on.
Thousands of acres bought by property developers outside of Dublin was “now development land with agricultural potential”, he told the accountancy body’s London branch.
“The bit that really keeps me awake at night is the €5.3 billion landbank. The only thing about that is that €3 billion of it is in Dublin, and there is activity in Dublin. The €2.3 billion outside Dublin will be the aforementioned agricultural potential. We will deal with that,” he said, though farmers have been slow to make approaches to Nama.
“Farmers are interested in the land. Farmers are very cute about these things. They want to buy land at the right price. Planning permissions are expiring – there is no point renewing the permissions.”
He cast doubt on the accuracy of Central Statistics Office (CSO) figures for residential property sales outside of Dublin. “At the moment, there is something strange going on Ireland which I can’t understand. House prices in Dublin are down by about 50 per cent and apartments are down by about 60 per cent,” he said.
The CSO is reporting that house prices outside Dublin are down by “only about 44 per cent”, so bringing the average for Ireland as a whole to 48 per cent.
“The reality I think is that the indices for outside Dublin are way behind the curve. The indices have a bit to catch up on, and the quicker it does catch up the better for us,” he went on.
Nama’s due diligence on the loans it bought from Irish banks was completed last week, he said, with a final discount recorded of 57 per cent – compared with the 58 per cent target set in 2010.
International investors now accept Nama will not offer “fire-sales”, he said: “They are much more realistic. They are trying to make money; I am trying to protect the taxpayer.”
Saying Nama was “well on the way” to repaying the €7.5 billion due next year, Mr McDonagh said 2012 was “really the year when Nama gets going in terms of activity in the market. We know now what we have and we have a pretty good idea about what we want to do with it. In fairness to the debtors, they are working with us.”
