Nama may defer €30m in payment from buyers

THE NATIONAL Asset Management Agency has said it may defer payments from buyers totalling €30 million to encourage the sale of up to 750 residential properties under its scheme to protect buyers from negative equity.

The State agency launched the the pilot scheme of its 20 per cent deferred mortgage payment plan in an attempt to shift some of its 10,000 habitable residential properties and stimulate activity in the moribund property market.

The initiative is designed to encourage buyers who can secure mortgage approval but who postpone their purchase fearing that property prices will fall further.

Nama is selling 115 houses, mostly family homes aimed at first-time buyers and homeowners, on 12 estates in Dublin, Meath and Cork in the pilot scheme.

Brendan McDonagh, chief executive of Nama, said that a total of 750 properties may eventually be on offer under the initiative.

Based on average prices of €200,000, Mr McDonagh estimated that Nama could defer a total of €30 million of €150 million worth of property purchases.

The sum involved wasn’t significant for Nama, he said, but it would have a “psychological effect” of encouraging purchases.

Mr McDonagh denied that the initiative was a subsidy for consumers or that it would prevent the market “finding a floor”.

It encouraged transactions while the market was still declining, he said.

There are 62 houses in Co Cork being sold in the pilot scheme and 53 in Dublin and Meath. All are on estates where the majority of the houses have already been sold.

Asked about the effect on existing homeowners in these estates who might try to sell their homes, Mr McDonagh said Nama “cannot do anything about historical issues” and could only deal with “what is in our bailiwick”.

Mr Daly said that filling vacant houses can affect “the overall value of everything in an estate”.

Known as the “80:20 Deferred Payment Initiative”, the scheme protects buyers from decreases of up to 20 per cent of the value of their property over five years.

Only 80 per cent of the agreed sale price will be paid upfront and the remaining 20 per cent will be paid after five years if the property does not fall in value. How much, if any, of the 20 per cent to be paid will be calculated on an independent valuation of the house.

Bank of Ireland, AIB subsidiary EBS and Permanent TSB have agreed to lend mortgages in the scheme and buyers must still have a deposit of at least 10 per cent.

Nama first announced the plan last July but the pilot scheme was delayed as it “took a bit of time to put all this together,” said the agency’s chairman, Frank Daly.

The scheme required state aid from the European Commission while Nama had to agree details with the Central Bank, banks and Government departments, he said. The commission was “very comfortable” with the plan, he said.

Nama said that it invited foreign-owned banks in Ireland to participate in the plan but they declined.

Mr Daly said Nama was not gambling with 20 per cent of the property price but that the agency was taking a “very managed risk”.

“It is based on our view, an optimistic view I suppose, of the property market and the prices that will be there in five years’ time.”