Pilot scheme is not the start of a housing bubble, says Nama
Under the terms of the pilot scheme, 115 properties — 62 in Cork, 53 in the greater Dublin area — will go on sale at set prices with the aim of enticing owner-occupiers, and particularly first-time buyers, back into the market.
AIB, via its EBS subsidiary, Bank of Ireland and Permanent TSB are involved in providing mortgages. The scheme will see the buyer proving a 10% deposit and then paying interest on just 80% of the mortgage. The remaining 20% is deferred for five years and carried by Nama.
If in five years the price of the house has increased then Nama will make back its 20% from the lender, whereas if the price has fallen Nama will take the loss, with the buyer effectively protected against negative equity throughout.
As for the buyer, there is no prospect of an increase in mortgage repayments — and if the value of the house falls by anything up to 20% they can continue to pay at the same level or seek or renegotiate downwards.
The properties available under the pilot scheme range from two-bed townhouses at Mount Oval in Rochestown and Ballincollig in Co Cork, to four-bedroom properties near Killeen Castle in Co Meath, and three-bedroom semi-detached houses in Crosshaven, Co Cork.
Nama will monitor the success of the scheme over the summer months and if it receives sufficient interest it will expand it, bringing in up to 600 other properties around the country.
Nama chairman Frank Daly said of the scheme: “There is very little risk for the buyer here.”
Instead, both he and chief executive Brendan McDonagh said Nama was engaging in a “calculated risk” on the 20% it could potentially lose out on were house prices to continue to drop.
The outline of the scheme was announced a year ago but it was launched yesterday after a period of consultation with banks and stakeholders, including the European Commission, who have now given the scheme the green light.
Mr Daly said: “We do not aspire to the type of market that it was this country’s misfortune to have experienced in recent years.” Mr McDonagh denied that Nama was acting as a bank or seeking to create a new housing bubble.
Mr Daly said he did not want it to be seen as Nama gambling with 20%, instead calling it a “managed risk” on properties that would be bought and inhabited, versus the current situation where people with mortgage approval might be afraid to draw down the mortgage for fear of negative equity.
Mr Daly said: “We believe the prices we are offering represent fair value.” The 29 units for sale at Delvin Banks in Naul, Co Dublin, for example, are in the region of €175,000, while at Brown Woods Barn in Dublin 22 properties are available at €335,000. Properties are available in eight locations in Cork.
AIB said it welcomed the pilot scheme with its head of mortgages, Jim O’Keeffe, claiming that sanctions in March were at their highest level in over 18 months.
Permanent TSB said it would advance mortgages under the initiative with a variable rate of just 3.69%.
Its head of marketing, Niall O’Grady, said: “By protecting those buyers from falls of up to 20%, Nama is tackling one of the key reasons people cite for putting off their purchase decision.”
The bank has set up a dedicated hotline for queries related to the initiative on 1890 500143.
* www.Nama.ie
Q. What exactly did Nama announce yesterday?
A. A pilot scheme, the 80/20 deferred payment initiative for the residential mortgage market, to attract first-time buyers with mortgage approval but who are holding back over negative equity fears.
Q. Should I be interested?
A. Quite possibly. Nama hopes that by removing the spectre of negative equity, it can help reboot the property market, and see this as “one piece of the jigsaw”.
Q. How does it work?
A. The buyer provides 10% deposit on the property, the bank approves up to 90% of the mortgage, providing 70% at the outset, and the seller receives an initial 80%. Five years on, Nama calls on the bank to make the deferred payment of 20% (or less, as the case may be).
Q. What about for the buyer?
A. First, look at the 115 properties at nama.ie. If any of them suit your needs, proceed to one of the three mortgage lenders involved in the scheme. If you gain mortgage approval, interest is only charged on the mortgage amount drawn down at any stage.
Q. What are the potential advantages for the buyer?
A. By saving on the interest repayments on the deferred 20%, you can get ahead on your mortgage repayments by the time you reach year five when the house price review takes place. Even if the price of the house has increased, your mortgage would remain the same. However, if the price has fallen by anything up to 20%, your repayments would reflect that. It can remain at the same level — meaning you are paying it off more quickly — or you can negotiate it downwards.
Q. What’s in it for Nama?
A. It has the view that 80% of something is better than 100% of nothing; in effect, it’s better to run the risk of losing out on a possible 20% than have a house lie idle and carry 100% of the cost.
Q. What if I already own a house in one of these developments and I am trying to sell it in the face of competition from this scheme?
A. Tough. As Nama head Brendan McDonagh put it, the easier thing for Nama to do would be to do nothing, and it can only control with what is in its own bailiwick.
Q. Will other properties become available?
A. If there is sufficient interest in this, yes. Nama says that a total of 750 similar properties could be included in the scheme, with a greater geographical spread, and between 10 and 15 more are to be added in the coming weeks. The initial 115 properties in Cork and Dublin and Meath were selected because of rental demand in those areas.
Q. Will there be any haggling over the prices?
A. Not likely. The prices are agreed with Nama, which claims they reflect a fair market value. So, a three-bedroom, end-of-terrace at Carrignafoy, Cobh, Co Cork, could be yours for €155,000, or you might fancy splashing out €400,000 for a four-bed at Naul in north Co Dublin.
Of the 115 properties included in the NAMA 80/20 deferred payment pilot scheme, 62 are in Cork and 53 in the greater Dublin area.
* Ardfield, Grange, Douglas, Cork: Three units remain out of a 28-strong development with a mix of semi-detached, detached, and terraced houses. Prices range from €205,000 to €210,000.
* Cul Ard, Carrigtwohill, Co Cork: 13 properties, a selection of two and three-bedroomed detached, semi-detached, and town houses in a development with 424 units overall. Prices will not be finalised until today but it is understood that until recently a three-bed semi-detached property here was for sale for €142,500.
* Highfield Park, Ballincollig, Co Cork: One three-bedroom, A-rated concrete-build house out of a total development of 221 units, the price is €175,000.
* Inis Alainn, Carrignafoy, Cobh, Co Cork: Seven properties, ranging from three-bedroom, end-of-terrace houses for €155,000 to three-bedroom semi-detached houses for €165,000. There are 59 units in the whole development, of which more than 40 have either been sold or contracted.
* Drakes Point, Brightwater, Crosshaven, Co Cork: Three houses in a 242-unit development, of which nine have been built. Prices were not available yesterday.
* Brightwater, Crosshaven, Co Cork: 11 properties in a 211-unit development. Prices for the 11 three bed semi-detached houses were unavailable yesterday.
* Rowan Hill, Mount Oval, Rochestown, Co Cork: 10 properties available under the 80/20 scheme in a housing scheme of 865 units altogether. Prices for the 10 properties, which are two-bedroom townhouses, were unavailable yesterday.
* Old Quarter, Ballincollig, Co Cork: 14 properties in a 476-unit scheme, of which 65 remain unsold. Prices for the 14 properties, made up of two and three-bed townhouses were not available yesterday.
* Brown’s Barn Wood, Naas Rd, Dublin 22: Two large four-bed houses left, going for €335,000.
* Loughmore Square, Killeen Castle, Dunshaughlin, Co Meath: 18 properties here, 16 three-bedroom houses and two four-bedroom houses, ranging in price from €270,000 to €360,000.
* Devlin Banks, Naul, Co Dublin: 29 units here, the final phase of a 76 unit development. Properties range from two and four-bedroom detached homes to semi-detached and terraced houses, with prices from €175,000 to €400,000.
* Carrickmines Manor, Carrickmines, Dublin 18: Four properties here, a mix of three and four bedroom units ranging in price from €275,000 to €310,000.
More details, including realtor contact details, are available from www.Nama.ie
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