Coldwell Banker

HUNDREDS of Irish investors who sold holiday villas and apartments in Spain during the property boom may be in line for a tax rebate of up to €20,000 after being illegally overcharged by the Spanish tax authorities on the sale of their properties.

However, the deadline to reclaim the overpayments, October 31, is looming.

Last year the European Court of Justice (ECJ) upheld an appeal by an elderly British couple who were ordered to pay more than twice the rate of Capital Gains Tax (CGT) applicable to Spanish residents.

Before January 2007, the CGT rate on the sale of a home in Spain for non-residents was 35pc — but only 15pc for residents had who owned their property for more than a year.

This policy sparked complaints from British investors who, like Irish nationals, had invested heavily in Spain.

Contravened

The ECJ ruled that the higher tax rate applied to investors who were not resident in Spain contravened European Community treaty rules on discrimination — forcing the Spanish authorities to set up a fund to compensate those on whom the higher rate had been levied.

The exact number of Irish investors who may be entitled to the rebate is not known as the Revenue Commissioners does not keep records of foreign property owned by Irish nationals.

But legal experts here have warned that time is running out for Irish nationals, who must file their rebate claims by October 31, when the deadline for the settlement scheme expires.

“In addition to the forthcoming expiry date, the scheme is subject to strict rules on paperwork,” warned Dublin solicitor Justin Lennon, the senior partner in one of a number of firms who have been assisting investors to reclaim their overpayments.

Investors with successful claims will also receive 6pc annual interest.

The European Commission challenged the Spanish rules, claiming they were discriminatory and, since the start of 2007, the Spanish tax authorities have levied the same 15pc tax rate on Spanish and overseas property owners.

Uptake of the compensation scheme by Irish investors has been low to date, in part due to concerns that investors may face further liability in Ireland on any capital gains they made on foreign investments.

By Dearbhail McDonald Legal Editor

Tuesday August 17 2010

HOUSE purchases have increased slightly in recent months but analysts say it is far too soon to conclude if the property market is picking up.

More than 7,800 mortgages worth €1.3 billion were drawn down between April and June, a 12.5% rise on the previous three-month period. However, Pat Farrell, chief executive of the Irish Banking Federation, said there was always a rise in spring following thewinter.
“There is always a pick-up according to seasonal factors in the second quarter of the year so it would be wrong to read too much into this. I’d wait until we see the figures for the next two quarters.”

He said the key comparison to make was with the April to June period last year when 12,686 mortgages were drawn down, meaning this year’s figure represents a dramatic 38.3% decrease in activity. First-time buyers proved more resilient, with the number of new mortgages falling 7%. First-timers now make up the biggest group in the market, accounting for 38% of new mortgages drawn down in the April-June period, against 25% last year.

At that time, top-ups were the most common form of new mortgage, accounting for 34% of the total, but they are down to 24% this year. People moving house make up 21.6% of the mortgages. Remortgagers or switchers account for 12.6%, and buy-to-rent investors are down to just 3.6% compared with 7% last year.

The value of the average first-time mortgage fell below €200,000 for the first time in five years to €192,848, a trend Mr Farrell said reflected the continuing fall in house prices. He said he believed first-timers felt prices still had a way to fall and that was why the number of first time mortgages was down on last year.

However, the PIBA, which represents independent mortgage and insurance brokers, said the low level of activity in the market was evidence that banks were not lending or making their lending criteria too tough.

“Activity levels should be much higher given that property prices have dropped dramatically by 36% since their peak in December 2006 and affordability has increased,” said director of PIBA mortgage services Rachel Doyle.

“There is no doubt but that the figures provide tangible evidence of a persistent squeeze on bank lending. No one wants the banks to lend irresponsibly as they have done in the past. However, lending facilities must be made available to people who have a good capacity to repay.”

The figures, compiled by the Irish Banking Federation and PricewaterhouseCoopers, show fixed rate mortgages have grown in popularity and account for half of all new mortgages.

By Caroline O’Doherty

Tuesday, August 24, 2010

This story appeared in the printed version of the Irish Examiner Tuesday, August 24, 2010

Falling property prices are encouraging investors to consider coming back into the market but buyers should look hard before they leap, writes FIONA REDDAN

WITH TWO-BED apartments now for sale in Dublin’s city centre for as little as €140,000, for those not languishing in negative equity or crippled by salary cuts, the possibility of property investing is once again coming to the fore.

Indeed a recent survey indicated that a third of people would now consider investing in property, although statistics show that while many people may be considering dipping their toes into the investment waters, few are actually doing so. In the second quarter of 2010 for example, investment property mortgages represented just 3.5 per cent of total mortgage lending according to IBF/PwC statistics, down from about 20 per cent in 2008, with just 284 investment mortgages drawn down.

While caution is obviously playing a part in the lack of investment decisions, the difficulties in obtaining finance in the current environment is also a factor. According to Karl Deeter, operations director with Irish Mortgage Brokers, it is now “incredibly difficult to get an investment mortgage”.

So what do you need to know before you make that leap?

1 DON’T COUNT ON CHEAP CREDIT

While interest rates in Europe are stuck for the time being at 1 per cent, new buy-to-let investors should not expect to get credit at anywhere near this rate, with banks having shifted rates upward repeatedly since the property bubble first burst. Back in the boom years, investors could expect to get tracker mortgages of about ECB +1.35 per cent, but the differential between residential lending rates and investment rates, has since widened considerably.

According to Frank Conway, a director with Irish Mortgage Corporation, in the past investors could expect a difference of about 30 basis points between residential and investment mortgages, but this is now as high as 150-200, with investment rates now well over 4 per cent. As Bank of Ireland’ recent 0.45 per cent increase in its investment rates demonstrated, these rates might continue to rise.

2 NOT EVERY BANK IS IN THE MARKET FOR MORTGAGES

If you have previously invested in property, you may recall the eagerness with which banks knocked on your door, delighted to lend you money. Much has changed since the boom years however and many lending institutions, such as Permanent TSB, are now simply excusing themselves from lending to property investors. Even those who are lending are extremely selective.

“Even when they have criteria, in practice they are finding ways not to lend,” says Deeter, highlighting the case of a recent client whose mortgage application was refused on the grounds that he had saved his deposit in a current account rather than a specific savings account.

3 DON’T BE IN A HURRY

The days of calling your bank manager to get a fast-track loan approval are long gone, and according to Deeter, approvals are now taking two weeks on average.

“It’s become harder over time to get the same thing done,” he says.

4 YOU’LL NEED A SIZEABLE DEPOSIT

With the days of 100 per cent mortgages long gone, investors are now required to come up with significant down-payments towards the cost of properties. In general, you should expect to have a deposit of at least 25 per cent of the overall price. So, for a €200,000 property, you will need a lump-sum of €37,500. However, according to Deeter, it is only the “very strong applicants” who are getting LTVs of 75 per cent.

“Someone who could afford the property even if it wasn’t rented – that’s the kind of person who is getting a mortgage at the moment,” he says. Otherwise, you will be looking at getting funding of only 50 per cent.

Banks have also gotten stricter with regards to valuations. Irish Nationwide for example, requires a new valuation report if the existing report is older than six months.

5 STRESS TESTS ARE ESSENTIAL

With interest rates “only going one way”, Deeter recommends that investors stress test their repayments at rates of up to 7 per cent. So for a €250,000 mortgage, you should have about €1,700 a month to hand.

6 PROPERTY MAY BE CHEAPER – BUT FINANCING IT ISN’T

While property prices may have fallen by as much as 50 per cent, the increase in the costs of financing means that a property purchase may not offer as much value as it first appears.

“Banks are essentially capturing any value in the market,” notes Deeter. For example, if you were to purchase a €400,000 property three years ago on a 2 per cent tracker rate over 30 years, you would have been looking at repayments of about €1,478 a month.

Now you may be able to buy that same property for €300,000 but on a 4.2 per cent rate, your repayments will be €1,467, so the property has actually only become €11 cheaper a month “You need to look at property from a cash flow, rather than capital appreciation, perspective,” advises Deeter.

7 RELEASING EQUITY MAY NO LONGER BE AN OPTION

With thousands of properties purchased all over the world, from the waterways of Leitrim to Dubai’s “World” project, on the back of equity which had been built up in residential properties in Ireland, refinancing your mortgage to facilitate the purchase of another property was once very much the done thing.

Not any more, however. With thousands of homeowners stuck in negative equity, many will find they have no value built up in their home which they can release to fund a new purchase. For those who can, the changed banking environment may mean that refinancing isn’t an option. “Banks mightn’t be too interested because you’re just borrowing the deposit,” notes Deeter.

In years gone by, a common technique to bring down the cost of financing used by property investors who no longer had outstanding mortgages on their own home, was to take out a new mortgage, at a cheaper residential rate, and use this cash to purchase an investment property. However, “no-one will do that now,” notes Deeter.

8 INTEREST ONLY IS FOR A LIMITED PERIOD

With only the most credit worthy of investors getting mortgages, interest only is “almost a no go area at the moment” notes Conway. “You have to be able to show you can pay off capital and interest,” he says.

If you do manage to secure an interest-only loan, remember that it is only designed to last for a specified time-scale, as investors with Permanent TSB are now discovering.

The bank is looking to move investors off interest only to full repayment loans, which is placing many investors under severe financial pressure as they are not making enough rent to cover the new repayments.

“Someone who could afford the property even if it wasn’t rented – that’s the kind of person who is getting a mortgage at the moment. Otherwise, you will be looking at getting funding of only 50 per cent

The negativity of the ‘doom and gloom’ merchants threatens the economic recovery, writes Marc Coleman

By Marc Coleman

Sunday August 15 2010

THEIR dispatches are little more than dumbed-down diatribes. Their self-promotional tactics would make Jedward blush. And their forecasts of recession were made so often and early that, like a broken clock, they were bound to be right at least twice a day. Our politicians take them seriously, but that just goes to show how superficial they are.

Unfortunately, the dime-a-dozen divas of despair are also darlings of a media addicted to reporting the next apocalypse. A media that has completely missed the huge positive angle on our economy. That’s because, to get the positive angle, you have to look back — and forward — over a longer period than two years.

Yes, the economy has shrunk by 10 per cent since 2007. But it grew by 413 per cent in the last four decades. Would it kill anyone to point out that a big step backwards has come after four equally big steps forward?

Or that, even if 100,000 emigrate, our population has grown by 300,000 in the last three years and by a million since 1996?

Or that, despite emigration, our strong rate of childbirth should ensure that any population shrinkage will be modest and short-lived, and that our population is still on target to grow to five million by 2020?

And that if we get our competitiveness house in order, we should be able to create enough jobs to bring the emigrants back by 2016?

The media thinks that bad news is the only news that sells. For personal and political news stories, it is probably right; but when a recession is on, it’s a different ball game.

Sure, in a boom we need a bit of constructive negativity. In a bust, we need the opposite. Like the drone of vuvuzelas in the World Cup, it’s time to bring an end to the drone of the divas of despair.

Having driven a nation to stash its cash under mattresses out of sheer terror, negative comment has pushed our savings ratio from a (too low) rate of four per cent to a (too high) rate of 10 per cent.

While job loss was inevitable in the recession, this means that tens of thousands of jobs more than was necessary were lost, hundreds of millions more tax revenues were wiped out and — perhaps the most devastating indictment of the irresponsibility of the divas — we are paying tens if not hundreds of millions more on our government debt interest than if commentary on the economy had been calm and measured. Thanks a lot, lads.

Like zoo cleaners looking after incontinent elephants, we now have to run behind these guys with a bucket and shovel. Recently I was appalled at some of the infantile comment on our downgrading by Moody’s. In June, in Hamburg and Munich, our Ambassador to Germany, myself and a team from the German/Irish chamber of commerce were busy promoting Ireland’s recovery — and in September we go on to Berlin and Dresden.

Now the tide is turning. Our bond spreads are coming down, easing pressure on the Exchequer. But nerves still have to be steadied back home: bringing down our savings ratio a notch or two will be crucial to stabilise spending, jobs and taxes at this critical economic turning point.

If the divas even had a credible solution between them, they might at least be useful. But their ideas are either derivative or just plain stupid. Take leaving the euro, for example. There is a school of thought that Ireland is now a net contributor to the EU and that we are “subsidising farmers” in the former Eastern Bloc. Ireland will, in fact, remain a net beneficiary of the EU until 2013. And, even if we were at last giving after all we’ve taken from Europe, what would it say about us if we turned our backs on those who helped us at the very moment when it was our turn to give something back?

Revealingly, the divas apply the same selfishness and cynicism to their policy prescriptions as they do to their cynical interpretation of our economic narrative at our expense.

They are also clueless about economics: citing Uruguay and Argentina’s devaluation of their currencies as a model for us to follow in leaving the euro ignores how those countries were able to use vast commodity exports to survive devaluation.

But our exports depend greatly on multinationals who were attracted here because of the euro. Leaving the euro would also beggar the Exchequer — due to high interest rates — within a matter of months, if not weeks.

In one TV programme on the housing market we were shown the scary sight of a row of boarded-up houses, allegedly representing the collapse of our housing market. The houses were, in fact, in Moyross and were boarded up because they were being evacuated for social reasons.

Another showed an empty hotel in Dublin’s Grand Canal Dock — surrounded by buildings that were full and thriving — as if it was the first sign of nuclear winter. What wasn’t shown was the empty wasteland of rats and rubble that the whole area constituted 20 years beforehand.

For every 10 buildings built since then, nine are busy and thriving. But only the negative 10 per cent gets noticed. It has to change.

Marc Coleman is Newstalk’s economics editor and presents ‘Coleman at Large’, Tuesdays and Wednesdays, 10pm-midnight

- Marc Coleman

Sunday Independent

Price database will be a priority, says Property Authority

THE PROPERTY price database promised by Minister for Justice and Law Reform Dermot Ahern this week will provide details of all property sales by address, sale price and date of sale according to the head of the Property Services Regulatory Authority (PSRA), which will publish the information.

Tom Lynch, head of the PRSA, said that the final shape and content of the register would be determined by legislation and that he would make the new register a priority once the new Authority was established on a statutory basis.

Estate agents are hoping that the new database will provide property sale prices almost immediately. The database should be open and detailed down to the last penny – and the information should be made available very quickly, Ronan O’Driscoll, of Savills estate agency, said.

“If a sale is completed today, the information should be a matter of public record tomorrow. Comparisons of house prices are only useful for a very short period, say, after three or four months.”

Apart from the benefit to individual buyers and sellers as well as to agents, there are broader reasons for a detailed register, said Mr O’Driscoll. “Principally, it will provide an accurate picture of the market.”

The only data now available on house prices is based either on asking prices or mortgages drawn down, neither of which give an accurate picture of the market. “Some say prices fell by 30 per cent when we know prices have really fallen by 50 per cent,” said Mr O’Driscoll.

Some people may not be happy that the sale price of their house will be published, but there “should be no exemptions”, he added.

The head of Douglas Newman Good, Keith Lowe, also believes a house price database will be good for the market, providing accurate information about house price trends.

“The Permanent TSB/ESRI index, for example, would be very much at variance to our own, which shows a much greater fall in prices. This will bring transparency to the market.”

Mr Lowe hopes that the database or register will be very similar to those in the UK and the US where anyone can insert an address and the most recent property sale price comes up.

“It should be backdated by six months to a year, if it is to be of real use to the economy.”

The Society of Chartered Surveyors also welcomed the announcement of the database, although SCS president Peter Stapleton said it is important that it covers the whole spectrum of the commercial property market.

“For this register to be fully effective it is vital that the legislation includes the commercial market in full and this needs to be clarified.

“The commercial sector’s need of a register is even greater than that of the residential market,” said Mr Stapleton, explaining that while commercial prices can be reported at the moment, transactions are generally weighed down with confidentiality clauses that restrict information.

The owner of property franchise Re/Max Ireland, John Fogarty, said the legislation allowing for a new database is long overdue. “Up to now vendors had false expectations as they were basing everything on guide prices. On the other hand, purchasers were assuming that any asking price should be 20 per cent less.”

Waterford auctioneer Mr Fogarty, who took over Re/Max Ireland in June, said “The current situation makes it difficult for vendors, purchasers and agents to operate. With the new legislation everybody will have the correct facts and will not be operating on rumours.”

Fine Gael housing spokesman Terence Flanagan TD also welcomed the announcement but warned “Ireland does not need another quango duplicating data that is already out there.”

A number of commentators have pointed out that the Revenue Commissioners already get regular information from solicitors on house sale prices (usually within a month of completion of a house sale).

A Revenue spokesperson yesterday confirmed that under the online e-stamping system introduced this year, solicitors still supply Revenue with “details of the consideration” – ie, the amount paid for a house.

“It is possible that Revenue could (subject to data protection regulations) extrapolate data from the e-stamping database for a proposed property database,” Revenue said .

The threat of repossession has receded for thousands of mortgage-holders in arrears, following the publication of new proposals by the Financial Regulator.

Planned changes to the existing code of conduct on mortgage arrears would make it more difficult for banks and building societies to seek repossessions.

The new rules would allow those in arrears to stay in their homes longer than allowed by the current 12-month moratorium on repossessions. Lenders would have to explore all viable options with borrowers in arrears and examine all alternative repayment measures.

Where borrowers are behaving reasonably, banks and building societies would have to wait at least a year before applying to the courts to repossess a home. As before, the 12-month period would be measured from the time arrears first arose.

However, under the revised proposals, this period may also be measured from the time a borrower fails to follow a revised payment arrangement and no further arrangements are entered into. In addition, lenders could not seek repossession if their customers had lodged a complaint or appeal with the Financial Services Ombudsman, even if it took longer than 12 months to resolve. This means borrowers who co-operate with their bank or building society would be largely protected against repossession. More than 10,000 mortgages are in arrears of between three and six months, and 22,000 are in arrears of six months and more.

While the proposed changes to the code of conduct are subject to consultation, they were broadly welcomed yesterday by the Irish Banking Federation and groups working with indebted householders.

Legal rights organisation Flac criticised the lack of external oversight of arrangements made by banks with their borrowers. Under the proposals, where it is clear that a borrower is deliberately not engaging with the lender, or has failed to fully and honestly disclose their financial circumstances, the lender may seek repossession.

The regulator says it is intended that financial institutions will not be allowed to impose charges on borrowers who co-operate reasonably and honestly. The new proposals are tougher on lenders than those proposed by the Mortgage Arrears and Personal Debt Expert Group, whose report last month recommended the moratorium not be extended beyond 12 months. The consultation paper also says borrowers must not be required to change from cheaper tracker mortgages to another type.

Lenders must put in place a mortgage arrears resolution process to handle arrears cases, and information must be provided to borrowers in a customer-friendly manner.

In response to reports of borrowers being hounded by lenders over arrears, the code proposes that banks and building societies be allowed only three unsolicited communications with borrowers each month, in addition to contact required under the code of conduct.

The regulator is also seeking views on how the “primary residence” qualifying for protection in the code should be defined.

Uncertainty has arisen in a number of cases. For example, when a couple separate and one partner moves into a holiday home they own, should the code apply to both properties? What happens when a person moves back in with their parents and rents out their property to help meet mortgage repayments?

The new rules would also require lenders to set up dedicated units to deal with arrears and to establish an appeals process.

The existing statutory Code of Conduct on Mortgage Arrears was introduced in February 2009. It replaced a voluntary code operated by the financial institutions. It was amended earlier this year, when the moratorium on repossessions was extended from six months to 12.

About one in 25 mortgages is in arrears of at least three months, according to the most recent figures from the regulator. Court proceedings have been issued in more than 3,000 cases, and almost 500 houses have been repossessed.

The proposals for the revised code are available on financialregulator.ie. The regulator hopes to implement the changes by November.

We in the property industry are optimistic, having seen signs of activity as bargain hunters swing into action, but it all depends on the banks, writes Declan O’Reilly.

Interest rates set to rise; unemployment rife across all sectors; wages falling; companies going out of business; fears of a double-dip recession in the US; crippling losses. Reading the newspapers and watching the news has become a struggle for most people. How much bad news can we take?

It’s very difficult to see through the fog and even more difficult to be positive about our economy in general and our property market in particular.

Property is, however, an optimistic industry by nature and we are beginning to see some faint threads of light. I think it may be the end of the tunnel (albeit a long way away) rather than an oncoming train.

We anticipate an increase in activity in the second half of the year, with both Nama and the banks likely to initiate sales. An increase in activity will be good for the market, setting a benchmark for prices and encouraging some of the domestic investors back. With values improving, there are likely to be increased inflows into property funds, particularly given the strong income returns on offer.

The development land market has been non-existent for the past 18 months. Several factors contributed to this, namely lack of consumer demand, unavailability of finance and uncertainty about the impact of Nama.

Now that Nama has begun to take over the first tranches of loans from the participating banks, we are finally witnessing some activity in the marketplace. Also, many of the non-Nama banks have become more proactive in a bid to limit their exposure to longer-term speculative assets and some of these are being offered to the market.

Current market activity is mainly confined to agricultural land, where the perceived “hope value” has long since been diminished and its realisable value is now in its existing use. Receivers are being put in place by many of the banks and assets being sold by this means are keenly sought after as prospective purchasers feel that real value is on offer. The lack of bank funding is still the major stumbling block and the old adage of “cash is king” has never been more pertinent.

Let’s look at some of the different sectors.

In the office market, while the vacancy levels are very high at 23%, take-up this year should reach one million square feet, 20% better than last year. Rents have dropped very significantly – over 50% in some cases – but there is a view that they are now beginning to stabilise.

There is demand from occupiers with enquiries in the market for over two million square feet. Occupiers are capitalising on the weak market to secure deals at levels below which it is economic to develop the buildings. They are getting lease flexibility and inducement packages that they could only have dreamed of 24 months ago.

The IDA is very busy, with a sharp increase in the number of itineraries with companies seeking to locate here. The number of jobs may be low initially but the quality of the companies is excellent and they are sure to grow over time. The dramatic reduction in wages and property costs has made Ireland an excellent place to do business again and there is a surplus of labour. This is good for the office market in the medium to long term.

We anticipate that several companies in the market at present will transact before the year end, boosting take-up. Some of the larger corporates who put their moves on hold over the past two years will look again in order to make the most of the current market.

There are very few cranes moving any more so when the buildings that are now under construction come to completion, the amount of available stock will diminish and eventually rents will rise again for new top-quality buildings.

The second half of 2010 has seen some stabilisation in the investment market but the recovery in values is largely limited to the prime areas in Dublin city centre.

The recovery in the prime market has been driven by overseas investors who consider current prices and yields to be good value compared to long-term trends. These cash buyers have so far targeted only modern buildings, let on leases with more than ten years to strong covenants, with only limited interest in either letting or covenant risk.

Sourcing properties that meet these requirements has proved difficult because of the limited number of opportunities available. Investors with income-producing assets are reluctant to realise losses, particularly where they have significant outstanding borrowings. In addition, although the banks appear keen to reduce their exposure to the property market, so far they have been slow to force sales. The shortage of stock has pushed prices up and, although there is limited evidence on which to base values, it is likely that yields have improved by 0.25% to 0.50% since the middle of last year.

Values outside the core locations and for buildings with short-term income remain under pressure and, with very limited local interest, have yet to find a floor. With market rents down by over 50%, a key concern for investors in the secondary market is over-renting and risk of tenant default, especially in retail. The value of secondary property is likely to stabilise only when rents begin to recover.

We have yet to see a large speculative development site offered to the market and it is unlikely to happen in the short term as current demand is so limited. Land value has always been the main variable in the development market and current values have diminished by as much as 90% from the market peak.

Landowners are going to have to become a lot more inventive if they want to extract value. There is no doubt that, for the market to move forward, it is going to have to take a step back. The reintroduction of techniques from yesteryear, such as license agreements, option agreements and joint ventures, is likely.

Our advice to landowners would be to use the current inactivity to try and add value to their land. For example, with a residentially zoned site this may mean achieving planning permission for a traditional-type housing scheme that could be easily subdivided in lots of 20 to 30 units.

In the new homes arena we are seeing continued signs of the market bottoming out. Recent receivership sales have generated great interest and have proved that properties are selling in volume if they are priced and presented right. For example at a recent launch in June at Carrickmines Green, Dublin 18, we recorded 85 sales at the launch weekend. We also recorded 45 sales when we launched Capella Court at Newbridge, Co Kildare.

There has been a noticeable increase in viewings and offers being recorded, with first-time buyers now looking to buy as opposed to continuing to rent. These buyers are now purchasing because they believe that, as the market has dropped 50%-plus from peak, now is the right time. New apartments are being sold below construction cost levels, excluding land costs. Once this stock is sold it cannot be replaced and sold at similar levels, as it not economically viable. When current prices are adjusted for inflation, house prices are reported to be at 1999 levels.

Any future growth in the new homes market will be determined by the lending practices of the banks. We are witnessing continued difficulties among buyers looking to purchase and being restrained by restrictive lending. This is the single biggest obstacle at present. If we are to return to a normal functioning property market, the banks will have to lend to buyers who can prove their ability to repay.

Optimism must be cautiously judged and scrutinised but we must accept the realities. Life moves on, buyers get married, have children, split up or trade down, and these are fundamental requirements for property acquisition.

In summary, while all markets will remain under pressure for the rest of the year and interest rates and unemployment will both continue to rise, the acceptance by vendors and banks of new value levels will encourage those with cash to look for bargains that will be offered over the next six to 12 months

DEVELOPER SEÁN Dunne has been granted planning permission to demolish and rebuild Hume House, a 1960s office block in Ballsbridge, Dublin 4.

An Bord Pleanála granted permission to Mountbrook Group, a company owned by Mr Dunne, for the development.

Approval was granted with 16 conditions, including that external finishes for the building should be agreed in advance with Dublin City Council.

Financier Dermot Desmond was among the objectors to the proposal, describing the design as “ugly”. He had said the facade treatment and the quality of the design were both “poor” and the materials “seem to be chosen for their cost-effectiveness as opposed to . . . design interest”.

Among the other objectors were An Taisce and the Pembroke Road Residents Association, which claimed the plan represented an attempt to improve the valuation of the site before it was taken over by the National Asset Management Agency (Nama).

Asked if the development would go ahead, the Mountbrook Group declined to comment.

Hume House, a nine-storey office block on Northumberland Road built in 1966, was named after its UK developers, Hume Holdings. It was one of the high-profile acquisitions made by Mr Dunne in 2005, which included Jurys, The Towers Hotel and the Berkeley Court Hotel in Ballsbridge.

He acquired it from Irish Life when he swapped it for a docklands property. Hume House was valued at the time at about €130 million.

The decision is likely to raise the value of the property, thus reducing the gap between its possible sale price and the value of any development loans taken out to fund its acquisition. Nama is in the process of taking over development loans from the banks.

The planned new building, though also nine storeys at its highest point, will be nine metres taller than the existing building.

It is designed in a “Y” shape, of six, eight and nine storeys high over a three-level basement.

The development includes more than 16,000sq m of office space and more than 3,000sq m of basement space. Finishes include aluminium, sandstone and white stone facades with extensive glazing.

One of the concerns raised by objectors was the possibility of flooding due to the planned three-storey basement and the building’s position in the Dodder flood plain.

But planning inspector Karla O’Brien, who recommended to the planning board that the application be approved, said there were no records of the site or surrounding area, which is 400 metres west of the river Dodder, ever being flooded.

A spokesman for An Bord Pleanála said it considered seeking specialist hydrological advice, but was satisfied that was not necessary.

Mr Dunne has also submitted revised plans for the Jurys/Berkeley Court site in Ballsbridge. This followed the rejection of plans considered by the planning board last year, which included a 37-storey tower.

His new plans include 12 blocks of chiefly residential development with two 15-storey towers.

A DECISION by Dublin city councillors to prevent applications for high-rise or even mid-rise buildings under the new Dublin City Development Plan will drive investment out of Ireland, the Construction Industry Federation (CIF) has warned.

Councillors this week voted to amend the draft development plan for 2011 to 2017, so that buildings above 28m – about half the height of Liberty Hall – cannot be built in any part of the city unless a separate local development plan is adopted.

Even in areas already identified by the council as suitable for high-rise or mid-rise buildings, such as the docklands, developments must remain low-rise until a Local Area Plan (Lap) has been brought into law.

A senior council planner told The Irish Times he hopes the Laps for the areas identified as mid and high-rise can by completed within two years.

However, the city council’s first Lap, which was to have dealt with development in the Ballsbridge area, was drafted over a two-year period but eventually rejected by councillors in June 2007 because it included provision for high-rise buildings. Three years on, no new Lap has been devised for Ballsbridge. Construction industry representatives said the councillors’ decision has put the economic recovery of Dublin and by extension the national economic recovery, in danger.

The point of the city development plan is to set out standards so that investors can have a reasonable expectation as to what is permissible when making a planning application. The removal of heights has created a dangerous uncertainty according to Hubert Fitzpatrick of the Dublin section of the CIF.

“The danger associated with this is that investors will choose not to look at proposed investment centres within Dublin until such time that the various Local Area Plans are prepared and adopted.”

The length of time it will take to draft and adopt the Laps will result in lost opportunities for investment, Mr Fitzpatrick said.

“It is not feasible to imagine that a business intending to set up an office or retail or other commercial activity in Dublin will invest in areas where there is no certainty as to even basic standards such as height.”

An even greater danger was that investors would get a message that mid and high-rise buildings were never going to be acceptable in the city and would take their business elsewhere, he said.

Jim Keogan, executive manager of the council’s planning department, said substantial resources would now be put into bringing in the Laps within two years.

“Priority will be given to preparing development plans for the areas designated for height.”

The problem with the Ballsbridge Lap was that what constituted mid and high rise hadn’t been agreed at the time, he said. He added that the development plan would be released for further public consultation before it was adopted later this year.

The areas designated for high-rise buildings of 50m or more were the docklands, Heuston and Connolly stations and George’s Quay. Areas suitable for mid-rise buildings of up to 50m include Phibsborough, the Digital Hub, the North Fringe, Ballymun, Pelletstown, Park West/Cherry Orchard and the Naas Road, Grangegorman and the Clonshaugh Industrial Estate.

New data shows 45% of mortgages with Irish Life & Permanent are currently in negative equity Buy-to-let property in vestors are coming under severe pressure as many plunge into negative equity or are unable to cover mortgage payments with rental income, according to new data from Irish Life & Permanent, Ireland’s biggest buy-to-letlender. Almost 45% of mortgages in a €2.1bn Irish Life & Permanent loan securitisation package are currently in negative equity, according to a report by credit ratings agencyFitch. Two-thirds of the loans in the package – called Fastnet Securities 8 – were granted to buy-to-let investors. Fitch said the interest cover on the mortgages was about 93%, which means that the rental income from the properties was not sufficient to meet the loan repayments. It said the large proportion of loans in negative equity in the vehicle may lead to higher losses on the portfolio for investors. Fitch said some of the loans in the vehicle have been restructured to take into account borrowers’ financial stress, with 3.9% of the loans only meeting interest payments and 2.85% in arrears. About 27% of the loans were given to self-employed individuals, which Fitchexpressed concerns about. “Fitch considers the probability of default for such borrowers to be higher than that for employed borrowers as self-employed borrowers face lower certainty of employment and income levels, particularly during [an] economic downturn,” the agency said. It was also concerned that one in nine of the borrowers were first-time buyers. “Fitch considers first-time buyers to be riskier due to the lack of a demonstrable track record of maintaining prior mortgage payments,” it added. Fitch said that 4.2% of the loans were on fixed “teaser” interest rates, 17.3% were on variable interest rates while the rest were on tracker rates. The Sunday Tribune last month revealed that Permanent TSB, IL&P’s banking arm, was planning to renegotiate tracker loan rates for investment property borrowers and put them on more expensive variable rates. Permanent TSB last month said it was raising its variable rates by 0.5% to coverfunding costs. Two out of every five properties in the Fastnet portfolio are in Dublin, with Cork and Kildare the next higher regional concentration.