THE prospect of a wave of mortgage defaults has increased with the news that one-in-10 home loans is in arrears.

Data from the Central Bank due this week is expected to show as much as 10.5pc of private residential mortgages -- about 80,000 loans -- are now behind their payments by at least 90 days.

While the bank's report on mortgage arrears covering the first three months of this year is not yet complete, it is expected to continue the trend of arrears rising more than 1pc every quarter, which has been the case since early last year.

At the end of 2011, 9.2pc of mortgages were more than three months behind.

Including restructured mortgages that are not officially in arrears, the rate of home loans in distress of some sort could be as high as 15pc.

The figures tally broadly with data from the banks. The latest round of financial results from the sector showed the rate of loans in difficulty has risen steadily in the past year.

Difficulty

The results will put pressure on the Government to put in place a formal structure for people who are unable to keep up their repayments.

The main banks have until the end of this month to present long-term plans for dealing with mortgage holders in difficulty to government.

After that the strategies will be tested before a final decision is made on what plans will be pursued by the state.

Yesterday, a spokesman for the Irish Banking Federation -- the industry's main trade group -- said the sector needed long-term solutions.

Some solutions could include formal provisions for the splitting of mortgages as well as the banks taking over a property and renting it back to the occupant.

Solutions like those are known to have been implemented on an ad-hoc basis by various lenders, but they are believed to be unwilling to formalise these arrangements for fear of "strategic defaults" by borrowers.

- Peter Flanagan

by Sunday Business Post 20.05.12

The Central Bank is set to order the boards of the three main domestic lenders to take direct responsibility for the implementation of policies to deal with the mortgage arrears crisis, The Sunday Business Post has learned.

Senior officials from the Central Bank are to attend upcoming board meetings at AIB, Bank of Ireland and Permanent TSB to emphasise to the boards that the Central Bank is unhappy with the progress made on the issue.

Under the strict new regime, directors will have to make sure executives are implementing practices and products for resolving the rapidly growing number of arrears cases on the banks' books. They will also have to make sure executives are fully recognising the losses arising from the arrears, and making timely and adequate provisions to cover them.

The escalation in regulatory action comes after months of wrangling between the Central Bank and the sector during which a previously cooperative relationship has turned hostile.

Regulators have been frustrated with what they see as foot-dragging by lenders in dealing with mortgage arrears cases, now expected to top 10 per cent of all owner-occupier homeloans. The Central Bankers feel the banks' case-by-case approach has been too limited and piecemeal to be effective.

The banks are beginning to respond and are planning to launch a range of new loan modification initiatives later in the year to provide market-based solutions for distressed borrowers. But many bank executives have expressed misgivings about the direction personal insolvency reform is taking. The industry does not want mortgages included under new rules, as they believe it will encourage strategic default.

As the squabbling continues, more borrowers are slipping into arrears, posing long-term problems for the strength of bank balance sheets, the economy as a whole and the personal finances of thousands of people

POSITIVE sentiment is one of the most vital ingredients necessary for a property market revival -- which is why Ireland's estate agents will be optimistic after the results of the Millward Brown survey which demonstrates that 78pc of the populace now believe it's a good time to buy a house.

Most experts are now united in believing that Ireland's massive property crash will begin to end this year or early next year. By this they don't mean that prices will start soaring again, but that they will stop falling and may even rise very slightly -- as some reports have already shown.

Price levelling will spread outward across the country from Dublin, in the same way the recent crash started in the capital and moved outward in waves during 2007 and 2008.

Apartments will take far longer to recover, however, as will properties in those remoter regions where boom era development was at its craziest.

Ireland's property market recovery won't happen as a straight-upwards line on the graph chart. More likely it will be a series of judders -- price rises and dips -- as occurred in the UK from 1994 after that country's 1989 crash.

The result will be a crooked, albeit slowly-rising line, with prices eventually rising by "normal" levels of 3pc to 6pc per annum.

Millward Brown also shows that we agree with many property experts who say that prices have 10pc more to fall before finding the bottom.

A hefty 68pc of those surveyed by Millward Brown said they thought prices would continue to fall over the next year.

How can we believe it's a good time to buy a house when we also know prices will continue falling?

To understand what's going on we need to ditch our boom-and-bust mindset of property solely as an investment. To a generation of gainfully employed young couples who have long intended to buy -- and there are by now thousands who have spent the past three to six years in rental accommodation and put their lives on hold -- a house is primarily a home.

Most of these couples will own one house at a time, and right now they want to buy their first one. They want to buy sooner rather than later.

What's important to the "property postponed" generation of Ireland's crash is that the worst is now over. They will tolerate a short-term fall in their new home's value for the sake of having more choice in the market and finding the right house.

They know they'll still be living in their purchase in 10 years' time. So being in the right area and near the right schools will supersede any short-term loss of value.

This is why homes sold in the 1980s -- even when property values were falling in value in real terms.

And this is why some couples have already started buying semis again in better parts of Dublin.

Rents are currently quite high with a three-bed semi in the city now setting a family back €1,300 per month.

Many of our "postponed" couples also believe they'd be better off buying now to stop any more payment of "dead money" and instead channel a larger sum into a property which they will eventually own.

For many of these couples, the property sentiment balance has already been tipped -- the problem now is finding a mortgage.

- Mark Keenan

Some people living outside Dublin have much more confidence in the Irish property market than Dubliners and are showing increased interest in buying Dublin property. Nevertheless Dubliners are outbidding overseas buyers for properties in their native city and county.

These are some of the conclusions that can be reached following the latest analysis of the Allsopspace auction results in the six auctions that have taken place over the last 13 months.

In the latest auction at the beginning of this month as many as 60pc of all properties were bought by buyers from parts of Ireland outside Dublin. This is an increase on the average 58pc level shown over all six auctions.

Numbers of Dubliners buying in the May auction also increased but it is still a relatively low 30pc average for all six auctions. The increased Dubliner trend may have been influenced by the increased number of south Dublin houses on sale in May's auction. Both Dubliner and regional buyers may also be outbidding overseas buyers whose share of the purchases fell from an average of 14pc over all six of the auctions to 10pc in the May auction. It will be interesting to see if this trend is sustained as the banks lend more money or whether the May buyer profile simply reflected the mix of properties available in that catalogue.

Interestingly regional buyer interest is not confined to regional properties. They are also buying in Dublin. As many as 180 Dublin residential properties were sold for a total of €35.5m at the six auctions and Dubliners bought 47pc or less than half of them. Regional buyers snapped up 36pc of them and overseas buyers 17pc.

In contrast with buyer profiles for Dublin properties, Dublin buyers accounted for a much smaller share of the 46 Galway properties sold -- only 7pc. As might be expected Galway buyers accounted for 52pc and buyers from other counties bought 26pc with the remaining 15pc bought by overseas buyers.

A slight variation of the Dublin market pattern was seen at the Castleforbes Square apartment development in Dublin's North Docklands where overseas buyers accounted for an even stronger 21pc share of the 48 bought. A still substantial 33pc of them were bought by buyers from the regions.

Not only do the 48 sales in the one Castleforbes development suggest that demand is holding up well for well fitted north docklands apartments, but it also shows that prices there increased over the 13 months. According to Robert Hoban, director of auctions at Allsop Space, Castleforbes prices "rose by about 6pc across the board. This is quite remarkable given the backdrop, whereby the market was widely reported to have fallen by over 10pc over the same 12 month period."

Equally interesting was how the March 2012 auction saw the Castleforbes sales nail the myth that any Irish house would get a better price than an apartment. In the March auction all the north docklands flats sold for well above the prices achieved by the Dublin houses in the same auction which, admittedly, were not in the most sought after areas.

Mr Hoban says UK buyers accounted for most of these overseas buyers at Castleforebes while "we also had buyers registered in France and Monaco. As many as 85pc of the Castleforbes lots were sold with tenants in place and these prices indicated average rental yields of 8.2pc gross across the board."

All but one of the 48 sold above the reserve price and the exception sold for the reserve making for an average price at 22pc above the reserve price.

The highest price paid was €227,000 for 440 Castleforbes Square, a tenanted three bedroom apartment producing €17,400 per annum.

Interestingly investors appear to be willing to accept lower yields for Dublin apartments compared to Dublin houses. Davy Stockbrokers says that the 15 Dublin houses sold at the two Allsop Space 2012 auctions achieved an average price of €230,467, and reflected average yields of 9.1pc. In contrast the average price paid for Dublin flats, while lower at €156,511, suggested a much stronger average yield of 8.5pc.

This may be partly due to the condition of some of the houses which may require refurbishment while the flats may have been in better condition.

A completely different trend was the case with regional properties as 52 regional houses sold for an average of €89,442 and indicated yields averaging only 7.4pc.

Regional apartments are generating more generous yields of 11.2pc as 20 flats sold this year for an average of €59,650. This contrast may be due to owner occupiers preferring to buy houses rather than regional flats.

- Donal Buckley

Two organisations representing retailers around the country have welcomed the new Retail Planning Guidelines published by Minister for the Environment, Phil Hogan.

"The new guidelines appear to strike the right balance between facilitating larger retail stores and re-balancing planning in favour of the retail cores of Ireland's cities and towns" says David Fitzsimons who is chief executive of Retail Excellence Ireland, the country's largest retail industry group with over 9,500 store members, employing over 110,000 people.

Comprehensive and timely is how the Irish Hardware & Building Materials Association (IHBMA) has described the guidelines.

Their main provisions are: The cap on the size of supermarkets in Dublin has been increased from 3,500 to 4,000sqm.

The cap on the size of supermarkets in Cork, Galway, Waterford and Limerick has been increased from 3,000 to 3,500sqm.

The cap for the rest of the country remains the same.

Out-of-town warehouse retail developments are being permitted in Dublin and other large cities only

New retail developments should take place in city and town centres, not in new retail parks and out-of-town retail centres

The country is being divided up into five retail planning regions, with each region developing a coordinated retail planning strategy.

Minister for Housing and Planning, Jan O'Sullivan added that the new guidelines will also avail of proper evidence of the need for retail development and ensure a pro-active approach in facilitating the meeting of those needs.

Explaining that the plan-led approach will be delivered through greater co-operation with planning authorities in the preparation of joint or multi-planning authority retail strategies, she said such strategies will be adopted by planning authorities in six gateway cities and towns that straddle local authority boundaries -- Dublin, Cork, Galway, Waterford, Limerick/Shannon and Midlands.

Mr Fitzsimons welcomes the moderate scale of the increases in the cap on supermarket size and their restrictions to the country's main urban centres as a dramatically increased cap would result in new retail monopolies. He says that the National Consumer Agency lobbied the Troika and Government hard for a significant increase.

By re-balancing the retail planning system in favour of existing retail cores in cities and towns, local authorities will be required to apply the sequential test to all new retail developments.

"This test means new retail developments must be located in existing town and city centres where possible, rather than in out-of-town locations. This should help to re-energise large numbers of smaller provincial towns and promote sustainable urban renewal, but only if correctly applied by local authorities and planning bodies.

"Without a doubt, there is room in the Irish retail landscape for the many shopping centres and retail parks that have been developed over the past decade."

Meanwhile, the IHBMA, whose members are in the business sector hardest hit by the downturn, supports the guidelines addressing what has led to the proliferation of retailing in locations where there has been poor demand, and which are unaligned with existing transport links. This, it says, has resulted in adverse impacts on the vitality of nearby city and town centres.

Jim Copeland, chief executive of the IHBMA, said the 'general presumption' in the guidelines against large retail centres located adjacent or close to existing, new or planned national roads and motorways contained in the guidelines, is a major step in the right direction.

"Recognition by the Minister that the retail sector is an essential part of the Irish economy and a key element of the vitality and competitiveness of cities, towns and villages throughout the country is very welcome," he said.

"A clear framework in the planning process for the continued development of the retail sector is critical. It is imperative that a strong and competitive retail sector is supported through a pro-active approach in planning, managing and reshaping our cities and towns," he added.

- Donal Buckley

A pity this was not enacted a few years ago in Clonmel!

THEY HAVE WAYS of making you pay: anyone selling a property and thinking they might escape having to pay the €100 household charge can think again.

Unlike an electricity bill or a gas bill, an unpaid household charge attaches to the property.

The Government is using the sale of property as another collection point for the charge and according to solicitor Pat Igoe, included in his pre-contract enquiries to solicitors for vendors “is a requirement seeking the receipt for the household charge covering at least to date of closing. I do not need to see it at that stage. But I do need confirmation pre-contract that I will get it at closing.

So, vendors will have to pay it on selling. I have had a few cases already. Principles dont count for anything when it comes to conveyancing Im afraid. Its the law, they have to pay it.”

Not that it’s the only time that the sale of property forces the vendor to clear outstanding charges. Where a development is run by a management company, homeowners can’t sell their property unless they are up to date with management fees.

Darren Chambers of Lisney says that, in his experience, around 40 per cent of the market is made up of executor sales.

So if the person whose name is registered on the property has died, “whoever inherited the property or the person acting on behalf of the estate has to pay the charge”.

By Donal Buckley

Thursday May 10 2012

IT could only be described as a bargain.

At the peak of the market the 10.5 acre site of the St Francis Brewery in Kilkenny city centre would have been worth between €20m and €30m.

If it had the tax incentives that were available for Kilkenny's McDonagh Junction complex it might have been worth even more.

But Kilkenny County Council and Kilkenny Borough Council appear to have gotten a great bargain by agreeing a price of €2.1m this week for the site.

Just before the market peaked, a similar site in Kilkenny, the Cattle Mart site on the other side of the River Nore, sold for around €25m or €1.9m per acre without tax incentives.

Developer Melcorpo's ambitious plans for the mart site were aborted and its receiver Aidan Murphy is expected to bring it to the market in the near future with an asking price of around €9m.

On that basis the value of the brewery site might have been €20m at the peak and could now be worth €7m.

Admittedly the mart site, which is practically cleared, would not be as expensive to develop as the brewery site which it is estimated may take up to €2m to clear.

As the brewery site also needs to be rezoned from its current industrial zoning it is not as ready to go as the mart site. Nevertheless the brewery site has the advantage of frontage on to Kilkenny's city centre in addition to its river frontage.

At the height of the boom, such features would have had developers salivating with ambitious plans for high-end fashion stores and apartments.

Local estate agent Peter McCreery said that despite the downturn, the city stands to benefit enormously from the fact that the two sites will now be available at the same time.

"Both sites will... also help the city to recover from the recession. Already the city's hotels are booked out most weekends and a number of multinational companies in the city are helping jobs," he said.