HOUSES BEING sold by the National Asset Management Agency with protection for buyers against a 20 per cent drop in value have already fallen by up to 80 per cent from the peak of the market.
Nama launched the pilot scheme for its negative-equity protection, 10 months after the plan was first announced, for 115 houses on 12 estates in Dublin, Meath and Cork aimed at first-time buyers and homeowners.
Designed to protect buyers from negative equity and to kick-start sales in a moribund market, the scheme may eventually be offered on 750 of Nama’s 10,000 completed residential properties.
One property for sale under the pilot, a four-bedroom house on an estate at Killeen Castle in Co Meath built by Dundrum shopping centre developer Joe O’Reilly, is being sold for €360,000.
Four-bedroom houses on the estate were originally priced at €1.9 million in 2008, a decline of 81 per cent in four years.
Under the scheme, Nama will defer 20 per cent of the price of the property for five years. If the house falls further in value over that time, Nama will bear that loss.
If the price remains the same or rises, the 20 per cent will be paid to Nama by one of three banks that agreed to lend mortgages in the scheme – Bank of Ireland, AIB subsidiary EBS and Permanent TSB.
“It’s a good offer for buyers who want to remove any uncertainty from their purchase about price drops,” said Nama chairman Frank Daly.
The scheme was launched as Central Bank governor Patrick Honohan said the banks should begin crystallising losses on mortgages over the coming months.
What concerned him most was to “get a better handle” on the state of mortgages at the banks, he said in a speech in London.
The Central Bank wanted to see banks being more concrete in how they deal with loss-making and delinquent mortgages.
“House prices have fallen on average by 50 per cent at peak. It is natural that there will be delinquencies, that there will be losses in mortgages. That is what we hope to get a better grip on over coming months,” he said.
To help struggling borrowers, lenders are being pressed to develop new products such as split mortgages, freezing part of the debt and negative-equity mortgages where debts can be carried from one property to another.
Dr Honohan also said in his speech that State spending would have faced “a crash landing”, rather than “a gradual glide path” without the help of the European Union and the International Monetary Fund.
Nama, meanwhile, rejected the the myth that the agency’s negative-equity protection scheme was another “bubble-type interference” in the property market, saying that it was designed to reduce prices, not increase them.
“We do not aspire to the type of market that was this country’s misfortune to have experienced in recent times – a market which was driven by irresponsible lending, unsustainable prices and inglorious hype,” said Mr Daly.
Chief executive of Nama Brendan McDonagh said the State agency would not haggle with buyers as the 115 houses were already priced at a “fair value”.
Nama is selling four-bedroom houses in an estate in Carrickmines, south Co Dublin, built by construction company Pierse and property developer Paddy Kelly for €310,000, which represents a 61 per cent decline from the peak of the market.
One-third of houses for sale are on four developments in Cork built by local developer Michael O’Flynn.
The largest number of houses for sale in one development is at Devlin Banks in Naul, Co Dublin, which were built by a company co-owned by Dublin auctioneer Brian O’Farrell.
Mr O’Farrell is better known as one of the “Maple 10” investors who bought 10 per cent of Anglo Irish Bank held by businessman Seán Quinn in a secret agreement to shore up its share price in 2008.
