PROPERTY VALUES:COMMERCIAL PROPERTIES provided as collateral for development loans to be acquired by Nama have fallen 50 per cent, according to the estate agent hired to value the toxic assets.
John Mulcahy, the chairman of auctioneers Jones Lang LaSalle, said Nama would estimate long-term economic value of properties backing development loans based on average seven-year property cycles in the market since 1971.
Mr Mulcahy, who has worked as a chartered surveyor for 39 years, said that he had never seen such a heavy decline in property values.
Speaking at the Oireachtas Joint Committee on Finance and the Public Service, he said the market was at the bottom of the cycle, while Minister for Finance Brian Lenihan said it was nearly at the bottom of the property cycle.
The Government plans to pay in excess of the current market value of the properties backing the loans – at a long-term economic value – to reflect the current sharp falls in property values in the market.
Mr Mulcahy said that commercial property values recovered on average by 88 per cent from the bottom of the market over seven-year cycles since 1971, while residential values rose by 96 per cent.
He said the figures showed that property markets can rebound.
“Markets always recover,” Mr Mulcahy told the committee.
“The one exception is Japan and the reason the Japanese market didn’t recover was that they never marked down the asset values. The banks in turn decided to take the writedown year-on-year and that’s why it took so long – they never revalued their assets.”
Setting a long-term economic value at 88 per cent above current market values would be “far too excessive”, said Mr Lenihan.
