House prices could lose half their value, says Goodbody’s
THE Government has forced NAMA to use out-of-date, inaccurate information to overvalue bank loans, according to Fine Gael’s Michael Noonan. Goodbody’s prediction that house prices will end up falling by 50% before levelling out, he said, spells yet more trouble for NAMA and further pain for taxpayers, “The prediction that house prices will lose half their value is desperate news for struggling homeowners. This outcome would send thousands more tumbling into negative equity.
“The consequences for NAMA and the taxpayer are equally worrying. NAMA’s so-called ‘business plan’ is based on the assumption that property prices will rise from the levels of last November – the reference period for determining the current market values of the banks’ toxic developer loans that NAMA is buying.
“ But according to Goodbody’s, house prices have continued to plummet since then and are set to fall by a further 16% in the immediate future”.
It was bad enough, continued deputy Noonan, that the taxpayer was being forced to pay far more than current market values for toxic developer loans in a tumbling property market on the basis of their ‘long-term economic value.
“But making matters even worse is the fact that NAMA is forced by the Government legislation to estimate this long-term value using outdated and inaccurate information.
“Only last week the ESRI predicted that the Irish labour force and population would shrink in the coming years because of recession-related emigration. This will mean lower demand for property. But in estimating the long-term value of the property-related assets that it is buying, NAMA is prevented from using economic and demographic projections from beyond last January. At that time, the CSO was still predicting a growing population for Ireland in the coming years”.
There were, he continued, certain accountancy rules which require banks to state their asset value on the date of audit, and prevent them from predicting a declining market, but that no such constraints applied to NAMA. “The chances of NAMA recovering taxpayers’ money, he concluded, seemed slimmer by the day.
