In a severe blow to hopes the crash was beginning to stabilise, a High Court judge said he was dealing with 70%-80% slumps in commercial property values “on a daily basis”.
This was seized upon by opposition parties, who said it made a mockery of Government estimates that only 20% of the €54 billion worth of toxic loans soaked up by taxpayers via NAMA would default because the price of development land will increase by 10% over the next decade.
The outlook was made bleaker still as respected international brokers Fitch Ratings predicted that despite house prices having fallen 24% since their peak, prices would slide to nearly twice that level, 45%, before finally bottoming out.
This set political alarm bells ringing as Labour and Fine Gael demanded urgent action to avoid widespread home repossessions, and a rethink on NAMA.
“The minister has been grossly over-optimistic on the NAMA write down, as these comments in the High Court would seem to bear out. The banks are just waiting for their NAMA bailout before they come down hard on ordinary customers.
“We need urgent action now to help the victims of the recession struggling with their mortgages as the Government is doing nothing for the tens of thousands of families facing repossession,” SAID Labour’s finance spokeswoman Joan Burton.
Fine Gael finance spokesperson Richard Bruton said: “The minister has taken a have gamble with taxpayers’ money on a hunch. He is the only one who thinks things have bottomed out.”
A spokesperson for Finance Minister Brian Lenihan said it was deeply misleading to base general valuations on what happened at the High Court.
“They are before the court because they are bad assets, you cannot use that as a reliable yardstick. Long term economic value will only be added to the value of certain NAMA loans and will be no more than 15% on those. Each property will be assessed individually.”
Fitch warned unemployment soaring to 15% and interest rate hikes would prompt a big spike in mortgage arrears. “Fitch expects all lenders to increase their mortgage rates and it seems certain that mortgage affordability will suffer against a backdrop of a generally higher tax burden, increasing unemployment and negative to zero wage inflation. Fitch therefore expects further house price declines and late stage mortgage arrears to rise,” said associate director Michael Greaney.
Mr Justice Peter Kelly, who manages the list of the Commercial Court, the big business division of the High Court, warned he was dealing with 70%-80% drops in property value on a daily basis.
Opposition parties pointed to Dublin’s €400m Irish Glass Bottle site, which has fallen 80% in value, as further evidence the Government was ignoring market reality with NAMA.