A PLANNED incentive scheme for residential property is a “short term measure” and will not interfere with the market, National Asset Management Agency (Nama) chief executive Brendan McDonagh said yesterday.
Mr McDonagh was defending the scheme against criticism by an Organisation for Economic Co-operation and Development (OECD) economist and Minister of State for Housing Willie Penrose.
Speaking at the Irish Council for Social Housing conference in Galway, OECD economist Christopher Andre said providing incentives had proved to be “counter-productive” in other countries.
The council’s executive director Donal McManus said he would like to see more detail on how the scheme is targeted so it did not create “inequities”. The Construction Industry Federation (CIF) said it did not believe it would “artificially inflate” the residential property market.
The Nama plan to protect a limited number of buyers from negative equity would be introduced this year and next and would involve up to 750 residential properties as a “short-term measure to try and aid liquidity”, Mr McDonagh told the event.
“We will only utilise it as long as we have use for it, and there is market support for it,” he said.
The scheme aimed to “generate sales of property controlled either by Nama debtors or by receivers, while providing an incentive to purchasers to invest at current prices in the knowledge that there will be a mechanism in place which will offer them protection against the risk of negative equity, in the event that prices should continue to fall for a number of years,” he said.
“I don’t believe in market intervention, but [Nama] could sit here for the next three years and get nothing back for a 100 per cent agency housing stock,” which was “getting older”, he said in response to questions.
It would have a “very limited application”, and would involve 2011 prices for houses, he said. Nama “had done the economics”, and it did not represent an intervention in his view, he said.
Mr Penrose told The Irish Timesthat "over-incentivisation has led to the problems we have had, and we have to learn from the past."
Mr Andre told The Irish Times he was "very sceptical", given the experience of such interventions in other countries. Low house prices could open the way to housing the homeless and those in need if there was adequate funding available, he said.
The CIF said the scheme “does provide a template in terms of innovative initiatives that might be adopted on a more widespread basis and made available to purchasers of all units to help restore a degree of normality to the property transactions environment”.
