Nama will not hoard properties - Ahearne

ECONOMIST ALAN Ahearne, adviser to Minister for Finance Brian Lenihan, has said that the National Asset Management Agency (Nama) will not hoard properties it seizes from foreclosures but will sell some initially to generate cash.

Speaking at the annual conference of the Irish Auctioneers and Valuers Institute (IAVI) in Dublin, Mr Ahearne said there was no incentive by not selling assets for 10 years and waiting for property markets to recover.

“Asset management companies need cash coming in,” he said.

“Nama will release properties. It won’t do it all in one go – it will do it gradually over time.”

Mr Ahearne said the Resolution Trust Company in the US, which was similar in operation to Nama, initially hoarded properties.

“Eventually it learned a lesson that that wasn’t good for the market and wasn’t good for the institution itself,” he said.

Irish banks would end up well capitalised “very shortly”, he said, once Nama determines their capital needs as loans are transferred in the coming months. “We will fairly soon have a banking system that is fit for purpose,” he said.

Mr Ahearne said Nama would be able to recover more money on the development loans as it would be able to pool loans provided by several banks to one borrower.

“Putting them together, which happens in an asset management company, allows you to maximise the value of the assets,” he said.

Mr Ahearne said the German government was creating a so-called “bad bank” several times larger than Nama with up to €210 billion in assets from nationalised lender Hypo Real Estate.

The Government didn’t want “a big huge explosion of lending” and a return to the lending of 2003 to 2006, he said, or for the banking system to drive economic growth.

UCD economist Colm McCarthy questioned whether there should be high stamp duty rates when there needs to be more transactions in the property market.

“There is no point in a failure by sellers who hold defaulting mortgages hanging on for prices that are just not going to return.”

Property taxes needed to be reviewed to generate activity in the market, said Mr McCarthy.

“It would be wonderful if some bottom fishers from overseas would come in and take a lot of these dud properties off the Irish State and the Irish banking system,” he said.

The sovereign debt markets had improved since early 2009 but were “still very edgy” with a huge amount of government debt to be sold globally, said Mr McCarthy.

There has been “a colossal increase” on social welfare notwithstanding the budget cuts.

Mr McCarthy said that the finances of private households and companies had been “very badly damaged” and that there were “widespread unrealised and unacknowledged capital losses”.

“They have already occurred and crystallising them and acknowledging them and dealing with them – painful and all as it is is part of a process of adjustment. Pretending they are not there is not a good idea,” he said.

Aidan O’Hogan, the former chairman of estate agents Savills, said Nama would be a monopoly given the scale of the control it had and that it would sell foreign properties in its early stages.

Residential property prices had fallen by close to 50 per cent, he said, and there were signs of the market for properties of up to €1 million bottoming out in Dublin. Negative equity – where the home loan is higher than the property’s value – should be resolved by allowing debt to move between properties or by deferring the debt for 10 to 15 years.

The property market would take five years to recover, said Mr O’Hogan, and then it would only return to 2002 and 2003 levels.

IAVI president Áine Meyler repeated the call for a National Property Price Register to show accurate, current property prices.