NAMA - Safe as Houses Spotlight


NAMA - Safe as Houses

A report on the fallout from the biggest economic shock in recent history - the property crash - which has left a generation blighted by debt.


Similar Content

Browse content similar to NAMA - Safe as Houses. Check below for episodes and series from the same categories and more!

Transcript


LineFromTo

What's next for our battered property market? For the life of

0:00:030:00:07

everyone's mortgage, there will be no (inaudible) The crash has handed

0:00:070:00:11

control to the Dublin government. Will their need for cash tip us

0:00:110:00:17

into free-fall? This is not just about rescuing greedy property

0:00:170:00:27
0:00:270:00:47

developers. I think we are entering Property, land, it means so much to

0:00:470:00:51

us here, but after the biggest crash in living memory, it's

0:00:510:00:58

actually worth so much less. Prices have been cut in half. We thought

0:00:580:01:05

we had valuable assets. Instead, we've just got mountains of debt.

0:01:050:01:11

Tonight, I'm on a journey into the heart of our property market. The

0:01:110:01:15

crash is damaging more than house prices, but jobs and opportunities

0:01:150:01:20

too. Northern Ireland borrowed big. Thanks to the crash, Dublin has all

0:01:200:01:23

the IOUs. What happens if they come to collect? You thought things

0:01:230:01:33
0:01:330:01:42

couldn't get any worse, you need to Our journey starts with a chunk of

0:01:420:01:48

property that has an interesting pedigree. I always like to get

0:01:480:01:52

dressed up for special occasions, these boots are about to set foot

0:01:520:01:55

on one of Northern Ireland's most special pieces of property. When

0:01:550:02:00

this land came on the market in 2007, after generations in one

0:02:000:02:06

family, it causeed quite a stir, tripling in price, in just nine

0:02:060:02:14

months. Can you see why? This ground sold for an incredible �1.7

0:02:140:02:18

million. It was intended to become a housing development. It never

0:02:180:02:25

even had planning permission. million. For one acre of land.

0:02:250:02:35
0:02:350:02:37

You bought it four years after that for? �94,000. That is a drop of

0:02:370:02:43

something around 94%? Yeah. It is. That is a serious drop in price?

0:02:430:02:48

is. Hard to believe. When you look around the place, the grass, the

0:02:480:02:53

danger of drowning. Hard to see how you could have marketed it at �1.7

0:02:530:02:58

million? Yeah. The banks were pushing prices up. Everybody was

0:02:580:03:03

being silly. Yet, when you look at it, if you were to take the fact it

0:03:030:03:08

dropped from �1.7 million to �94,000 over the space of 4 months.

0:03:080:03:15

A drop of �33,000 a month. As we are standing here it could still be

0:03:150:03:19

falling in value. It could be worth nothing by January? It's worth

0:03:190:03:23

something to us. No matter what we paid for. It an acre of land the

0:03:230:03:26

market value as is today. What do you want to do with it? We are

0:03:260:03:30

hoping to develop it. We have no rush to do so. We can sit on it.

0:03:300:03:33

See what the market does. We have ideas and we are putting them

0:03:330:03:38

together at present. Do you think it will be worth �1 million again?

0:03:380:03:41

Always that possibility. We have the time. We believe it's at rock

0:03:420:03:48

bottom at the minute. Who can tell. Who can tell? Is there worse to

0:03:480:03:51

come? These questions are critical to the future wellbeing of Northern

0:03:510:04:01
0:04:010:04:04

Ireland. The thing is, we may not Welcome to this house. It is for

0:04:040:04:09

sale. These surroundings were reckoned to be under a shade of �1

0:04:090:04:13

million. This is the dining room. lovely room to be in for

0:04:130:04:19

entertaining friends and family. The estate agent's brochure tells

0:04:190:04:26

us that this five bed roomed house redefines classical elegance. You

0:04:260:04:31

are hoping the floor will add to the value. It was left over from a

0:04:310:04:36

church restoration project. They had enough to do this floor.

0:04:360:04:40

also defines the unprecedented scale of our property crash.

0:04:400:04:45

guess, if we put it on six months before we did it might have gone

0:04:450:04:50

quite quickly. Our timing was a little bit late. What is it on for

0:04:500:04:54

now, what was it on for at the beginning? It started off at �950.

0:04:540:04:58

It wasn't a figure picked out of the air as such. It was very much,

0:04:580:05:03

this is what is being offered. Now, we are pretty much half that. We

0:05:030:05:09

are just under the �500 stamp duty threshold. This is the property

0:05:090:05:14

market in Northern Ireland today. Sales are slow, while prices have

0:05:140:05:18

been falling fast. Alan and Dot aren't in negative equity. That is

0:05:180:05:25

when you owe more in debt than your house is worth. Brian is. Property

0:05:250:05:28

in most ordinary people's life is their security. You are going out,

0:05:280:05:33

coming home at night to your property. I even would see it as a

0:05:330:05:38

long-term part of your pension of the later life you would have

0:05:380:05:42

equity to get you through difficult times. You know, so the fear of

0:05:420:05:47

losing all that, it's like just presenting a black hole to you.

0:05:470:05:51

Brian owes the bank �60,000 more than his house is worth. The crunch

0:05:510:05:56

came when he lost his job and couldn't make his mortgage payments.

0:05:560:06:05

I was in a good, secure employment. With a satisfactory salary, able to

0:06:050:06:09

maintain a good lifestyle it's amazing how quick it can change.

0:06:090:06:15

From being totally secure, and being able to have a life, to

0:06:150:06:21

feeling, where do you go? Where is the way out here? What's in front

0:06:210:06:25

of you? What does the future hold? At the moment, to me, it just looks

0:06:250:06:29

black. He expects the bank to take the house from him in a couple of

0:06:290:06:33

months. They will sell it, but that won't pay off the mortgage. Leaving

0:06:330:06:40

Brian to find the remaining �60,000. The fact of there being a shortfall

0:06:400:06:44

on the property. Does that mean I will end up in bankruptcy because

0:06:440:06:48

of shortfalls? Where does it actually stop? It won't stop with

0:06:480:06:51

the repossession of the property. Obviously, there will be a

0:06:510:06:56

shortfall. Where does this nightmare stop? Brian is just one

0:06:560:07:01

of 44,000 households in Northern Ireland in negative equity. That is

0:07:010:07:06

equivalent to every house household in Newry, Coleraine, Ballymena,

0:07:060:07:11

Antrim Ando ma combined. If they are hoping for a rise in prices to

0:07:110:07:15

help they are likely to be disappointed. For the life of

0:07:150:07:19

everyone's mortgage there will be no recovery. Mortgages typically

0:07:190:07:23

last 20, 25 years. There will be no recovery in the lifetime of any of

0:07:230:07:27

the mortgages that currently exist. That is hard to take in for people

0:07:270:07:31

who grew up with the idea that property goes up, safe as houses,

0:07:310:07:37

what happened to that? Only thing safe is the bricks and mortar, the

0:07:370:07:42

asset value is not safe. That is it. That one view. Others are more

0:07:420:07:46

positive. There is some evidence buyers are returning, if the price

0:07:460:07:53

is right. I've come to Donegal Square, the commercial heart of

0:07:530:07:57

Belfast. In these lean times this estate agency has gone back to

0:07:570:08:03

selling property by auction. In September, it raised �2.3 million.

0:08:030:08:09

A far cry from 2007 when their previous auction sold property

0:08:090:08:14

worth �82 million in a single morning. Chalk and cheese in terms

0:08:140:08:20

of the lot size and the number of lots. We would have 60 plus lots.

0:08:200:08:30
0:08:300:08:31

Figures from �500,000, we are down to �50,000 up to �300 ,000. How are

0:08:310:08:36

you doing? They are getting ready for another auction. Most ever the

0:08:360:08:41

properties are repossessions which are on the up. Misery for

0:08:410:08:46

homeowners. The bell there is quite significant. They ring it whenever

0:08:470:08:51

there is a deal done in this office. You can imagine the boom times it

0:08:510:08:55

was being rung constantly. I hear there are some people in this

0:08:550:08:58

office who have never heard it chime. To buy property you need

0:08:580:09:04

money. That used to come from banks. Not any more. Bank finance for

0:09:050:09:07

almost anything in property at the moment is difficult to obtain. What

0:09:070:09:12

we are actually doing, what the auction is doing, is, next, looking

0:09:120:09:18

for cash purchasers. I have �20, you would need more to buy one of

0:09:180:09:22

these properties? �20 would be a start, but I think, yes, you would

0:09:220:09:26

need more. In our upcoming auction there would be one or two lot sizes

0:09:260:09:30

that are surprisingly small. If you clear your credit card you might be

0:09:300:09:33

able to buy something. Talking about that finance. What was it

0:09:330:09:39

like during the boom, trying to get finance, what is it like today?

0:09:390:09:43

2005 to 2007, if we had a client who wanted to buy an investment

0:09:430:09:48

property for �10 million, he could go round the Square by lunchtime

0:09:480:09:54

have six offers to fund the purchase of that. Anywhere up to

0:09:540:10:00

maybe 90% or 95% of the requirement. Today, the same client could walk

0:10:000:10:07

around with an e -- equally good asset and not receive an offer.

0:10:070:10:11

That is the difference. Land, land, land was the banking mantra until

0:10:110:10:15

the banks ran out of money. When they ran out of money, so did

0:10:150:10:20

everyone else. The loans couldn't be re-paid. The banks were bust. To

0:10:200:10:24

get some idea of the sheer scale of economic carnage causeed by the

0:10:240:10:28

crash on the island of Ireland you only have to look around at the

0:10:280:10:33

banks and their accounts on this square. To the north, First Trust

0:10:330:10:41

and it is parent AIB, nationalised by the Irish government. 14 billion

0:10:410:10:48

gone. To the south, Bank of Ireland, 9 billion, disappeared. To the east,

0:10:480:10:55

Ulster Bank, now owned by the UK taxpayer. Well, they have waved

0:10:550:11:02

goodbye to.2 billion. To the west, Northern Bank. It's Danish-owned.

0:11:020:11:05

It's accounts reflect a local picture. It was famously robbed by

0:11:050:11:11

the IRA in 2005, in the biggest UK bank heist ever, they could have

0:11:110:11:14

returned every month for a year- and-a-half before they would get

0:11:140:11:23

close to what went out the door in the crash. It robbed Northern of

0:11:230:11:28

�577 million. The banks handed out money like there was no tomorrow,

0:11:280:11:33

but tomorrow came. It's a zombie banking system. It has the

0:11:330:11:37

appearances of a normal banking system but not the practice. In

0:11:370:11:40

that, there is no serious lending going on in Northern Ireland.

0:11:400:11:45

does it look like they are operating just fine? They are on

0:11:450:11:51

life support from the taxpayer. On a very, very large scale. The whole

0:11:510:11:56

structure is maintained by British and Irish governments. When the

0:11:560:12:03

crisis hit the UK government moved quickly to sure up banks like RBS,

0:12:030:12:07

owners of Ulster Bank. The Irish government had a particular problem

0:12:070:12:11

and a particular solution. The problem was, the scale of the crash

0:12:110:12:15

and the amount of toxic debt in such a small financial system. The

0:12:150:12:20

Irish banks simply had no money to get them working again the Irish

0:12:200:12:26

government decided to take out of all of the bad loans into a so-

0:12:260:12:29

called bad bank, it's called National Asset Management Agency,

0:12:290:12:34

Nama for short. It's the biggest player in town. You won't see it

0:12:340:12:37

around here. They are a major influence into what happens. How

0:12:370:12:42

they decide to approach dealing with property and the re-- recovery

0:12:420:12:44

of debt will be important no everyone in Northern Ireland over

0:12:440:12:49

the next few years. An Irish government agency became the key

0:12:490:12:54

player in property here. Nama took control of office blocks, housing

0:12:540:13:02

developments and undeveloped land totalling �3.35 billion. It would

0:13:020:13:06

be enough to pay off completely everybody's mortgage who had bought

0:13:060:13:16
0:13:160:13:16

a home here over the last four It is such a big agency, with 74

0:13:160:13:19

billion the nominal value of the loans on its books, that it needs

0:13:200:13:26

to realise it almost is the property market in Ireland. �3.5

0:13:260:13:31

billion is a helluva lot of assets to earn him a very small market

0:13:310:13:36

like Northern Ireland, so what they do we have a huge influence on the

0:13:360:13:46
0:13:460:13:49

property market there. Welcome to NAMA town, County Down. Is this a

0:13:490:13:55

glimpse of Northern Ireland's future? A place where the Dublin

0:13:550:14:02

government effectively calls the shots in their property market.

0:14:020:14:08

Much of Sam Thompson's money came from the banks in Dublin. In 2007,

0:14:080:14:12

Thomson told the Council of his plans for new housing estates, a

0:14:120:14:22
0:14:220:14:23

bypass and a new school, but NAMA's debts drag down his grand designs

0:14:230:14:30

for this town. The current financial situation has put all of

0:14:300:14:34

that on hold which have an impact not only in terms of industrial

0:14:340:14:38

development on the outskirts of the town but also in terms of high-spec

0:14:380:14:45

and modern schools. You are talking about something that is affecting

0:14:450:14:48

people's education and employment prospects. It has a major impact.

0:14:480:14:54

The problem comes when a property developer gets into the situation

0:14:540:14:59

that Sam Thompson is in. When it is in receivership, there is a

0:14:590:15:03

different perspective. A Sam's debts are tied up between several

0:15:030:15:09

banks but because none much moved first, they sealed his fate. They

0:15:090:15:13

started selling dozens of his properties the summer at knock-down

0:15:130:15:18

prices. Unfinished flats here could be had for �40,000 but the real

0:15:180:15:28
0:15:280:15:29

discounts came at the top end of the market. Assam Thomson property

0:15:290:15:32

offered at �1.2 million sold earlier this year but for a third

0:15:320:15:39

of its original price. And this luxury house was originally 1.3 �5

0:15:390:15:43

million. When it went back on the market two weeks ago, it was left

0:15:430:15:52

than half that. Again, there is a web of bands involved alongside

0:15:520:15:56

NAMA, but when they combined to offer property, that adds fuel to

0:15:560:16:00

the sale, and the neighbours can only watch their tidy profit go up

0:16:000:16:07

in smoke. This couple live yards from the Sam Thompson's Homes,

0:16:070:16:12

which have driven down the asking price of their home. When it was

0:16:120:16:17

first on the market, in their initial ownership, they were

0:16:170:16:21

significantly well above our own price so we thought on the back of

0:16:210:16:24

the marketing that was going on with those properties, perhaps it

0:16:240:16:29

might attract somebody to come and look at our House, but since this

0:16:290:16:34

situation has taken hold, they have come in beneath us, so we have been

0:16:340:16:41

on an island and in suspended animation. This is a metre range

0:16:410:16:44

property in the scheme of some of the mansions that have been built

0:16:440:16:49

in the area -- mid-range property. When you get back level of houses

0:16:490:16:52

coming on the market at the seriously discounted price, it is

0:16:520:16:58

pretty much impossible to compete. Selling to a low is the problem for

0:16:580:17:04

this couple. Not selling at all is the problem near by. A potential

0:17:040:17:07

manufacturing investment that would bring jobs is stalled because the

0:17:070:17:17
0:17:170:17:19

investor can't find a plot of land that is tied up in NAMA. We know

0:17:190:17:24

someone who is interested in a plot of land and we have pointed them in

0:17:240:17:28

the direction of the receivership. Are we talking about a company that

0:17:280:17:34

could employ people? Yes, and manufacturing company that is

0:17:340:17:43

interested in land. But they have a different set of priorities, NAMA.

0:17:430:17:47

Yes, they don't want to send it to several individual people and break

0:17:470:17:53

it up. You are talking to specific examples where this is affecting

0:17:530:18:02

employment prospects in the area. That is correct. Mall developers

0:18:020:18:09

will definitely go bust as NAMA takes decisions. Many businesses

0:18:090:18:14

who dabbled in property could also go under. They used cash flow from

0:18:140:18:17

the companies to borrow money to fund their property deals. Now

0:18:170:18:22

those loans could kill or otherwise healthy companies. That his

0:18:220:18:31

company's employee in hundreds of people now caught in the NAMA web.

0:18:310:18:35

Up until now, they have been trying to sort out the sheep from the

0:18:350:18:43

goats, but now NAMA have to decide those businesses they have taken in.

0:18:430:18:47

What are we going to do with the land? That is where the fire sale

0:18:470:18:51

danger could arise, where they simply try to offload all of that

0:18:510:18:55

land on to the market and make the situation worse, and what do we do

0:18:550:19:00

with the business? In many cases, there are real businesses attached

0:19:000:19:06

to these property loans. Make no mistake, this is about jobs, not

0:19:060:19:12

just property. The titanic building is striking and it is our most

0:19:120:19:20

expensive tourism project ever. The company building it arose NAMA

0:19:200:19:24

nearly 500 million euros. Harcourt has already had a business plan

0:19:240:19:28

approved by them and the funding on this project is entirely separate.

0:19:280:19:35

All good so far, but legally NAMA could still call in that big loan

0:19:350:19:39

at a moment's notice. Will they sink our Titanic tourism project?

0:19:390:19:44

That is unlikely but the truth is, no one really knows. This is

0:19:440:19:52

uncharted territory. I have spoken to some of the firms caught up in a

0:19:520:19:56

NAMA and the receivers going after them. That could happen in the new

0:19:560:20:02

year. No one talks on camera. But the businesses involved in this

0:20:020:20:07

fear they are not talking with a bank that was to protect its assets

0:20:070:20:12

but the agency of a government that wants to get cash, and if you need

0:20:120:20:15

cash quickly and you have got assets, the only thing you can do

0:20:150:20:24

is liquidate. Conner makes his living negotiating

0:20:240:20:32

on behalf of both big developers and small investors in debt to the

0:20:320:20:39

banks and NAMA. There has to be some fear factor in the day-to-day

0:20:390:20:43

situation but it is more the uncertainty. We don't know what is

0:20:430:20:48

going to happen to the assets. Is there going to be a disposal

0:20:480:20:53

programme executed in the next 12 months? Is that a fire sale? Some

0:20:530:20:58

might say fire-sale, others may say, will they sell the assets in the

0:20:580:21:06

next three years? This is where the economic becomes political. For

0:21:060:21:11

generations, Unionists in Northern Ireland have feared doubling from

0:21:110:21:16

meddling north of the border. -- Dublin. Who would have thought they

0:21:160:21:21

would have gained most interest by effectively going bust? To be the

0:21:210:21:24

most influential man in Northern Irish property, I have had to go to

0:21:240:21:31

Dublin. With the stroke of a pen, he could put 150,000 companies out

0:21:310:21:35

of business. In his first interview for a Northern Ireland audience,

0:21:360:21:40

the chairman says he is confident of the part he wields over the

0:21:400:21:47

economy. When we send a company or a developer into receivership, in

0:21:470:21:52

some quarters that would be perceived as a popular outcome. I

0:21:520:21:56

would personally regarded almost as a failure, that we haven't managed

0:21:560:22:01

to engage with that individual all with that debtor on a co-operative

0:22:010:22:05

basis and keep them going. There will be cases where they are just

0:22:050:22:11

not viable and there is no point in stepping away from that. There is

0:22:110:22:18

just no future. It is in nobody's interest to keep them going. NAMA,

0:22:190:22:24

we can't. We have already spent billions in tax money and the last

0:22:240:22:29

thing we should do is spend further good money after bad bank lending.

0:22:290:22:34

One of the developers has gone bust and the council's stake they would

0:22:340:22:39

like to get industrial development going but NAMA is not discussing

0:22:390:22:43

how they would release land at the moment. I am aware of the cases but

0:22:430:22:48

I will not discuss the particular case because of confidentiality but

0:22:480:22:52

I am surprised that anybody would say we are not engaging on issues

0:22:520:22:58

like this because I know there his engagement and I can assure you,

0:22:580:23:01

there will be no difficulty with continued engagement on that or any

0:23:010:23:10

other case. And that engagement in Northern Ireland is playing against

0:23:100:23:14

a background of economic turmoil in the republic and the wider crisis

0:23:140:23:23

in the eurozone, which adds up to one thing. Dublin's need for money.

0:23:230:23:26

NAMA's job to bring in money, what does it mean for Northern Irish

0:23:260:23:34

Holdings? To be dump it? Absolutely not. It is something to be done

0:23:340:23:39

over time. Our lifespan is intended to be seven-ten years, so we don't

0:23:390:23:44

have to deal with this in the morning. No fire sales, no

0:23:440:23:50

speculative hoarding, just a very steady, measured disposal over a 7-

0:23:500:23:55

10 year period. We are aware of the sensitivities in Northern Ireland

0:23:550:23:59

said they will be very careful about how they sell assets but

0:23:590:24:04

ultimately, if there is no buyers within five to ten years, there

0:24:040:24:09

will be fire-sale prices. already know Dublin's need for

0:24:090:24:12

money can be too broken promises. Two weeks ago, the Irish government

0:24:120:24:18

dumped plans for Ireland's most expensive road project, a �400

0:24:180:24:27

million commitment for road up grading. As NAMA gets more

0:24:270:24:30

desperate for cash, Northern Ireland is an easier place to sell

0:24:300:24:35

than in the public. Politically you are right and that is why it is

0:24:350:24:40

good and important that we keep political relations with the

0:24:400:24:44

decision makers in the Republic, so that we can keep on pressing our

0:24:440:24:48

case. It is not in the interests of the republic to have an economy

0:24:480:24:58
0:24:580:25:02

here which is a basket case. Northern Ireland does -- it does

0:25:020:25:10

have a direct line to NAMA. But here is the big problem. Northern

0:25:100:25:14

Ireland's fortunes, and the company's are entwined but our

0:25:140:25:19

priorities are separate. They need to look after taxpayers in the

0:25:190:25:22

republic and storm it needs to worry about the ones here. So far

0:25:220:25:26

relations have been good but as we enter what the finance minister

0:25:260:25:31

calls this dangerous phase, is that relationship good enough? It seems

0:25:310:25:36

not, because suddenly Stormont's special advisory role is and that

0:25:360:25:41

special. There is a vacancy on the board at the moment and Stormont

0:25:410:25:49

once its name on the feet. -- wants its name on the seat. I think we

0:25:490:25:53

need it to be more formalised with someone on the board and it would

0:25:540:25:58

be naive of me to believe there will not be casualties. There will

0:25:580:26:02

be casualties. I want to ensure by working with the Irish government

0:26:020:26:09

and by having an input into NAMA and by ensuring that they fully

0:26:090:26:15

understand the importance of many of those businesses to Northern

0:26:150:26:20

Ireland, we minimise the impact it will have, but I am sure that there

0:26:200:26:26

will be cases where it is inevitable that NAMA will make

0:26:260:26:30

decisions that will impact on the real economy in Northern Ireland.

0:26:300:26:35

There is a lot of anger, a lot of fear, a lot of emotion, because we

0:26:350:26:39

are talking in some instances, maybe a family business that has

0:26:390:26:42

been up and running for 40 years and because maybe they got involved

0:26:430:26:46

in the property market in the last five years, they are unable to pay

0:26:460:26:53

their debts. That is a veritable -- difficult situation to deal with.

0:26:530:26:58

For Brian, at the sharp end of the property crash, it feels like the

0:26:590:27:02

institutions who caused the problem was saved at all costs and worse

0:27:020:27:09

still, the apparent culprits still write them rule book. We are

0:27:090:27:14

getting charges from these people for direct debits and extra charges

0:27:140:27:20

in a roof. Basically the banks have been bailed out. Could that not

0:27:200:27:30

have been put towards people that are in difficulty? The Bank... If

0:27:300:27:34

it had not have lent me such a high amount of money on the value of the

0:27:340:27:44
0:27:440:27:45

property, then why are they getting bailed out? What would you say to

0:27:450:27:50

someone who says, this is surely only to do with property? It will

0:27:500:27:55

not have any impact on me? This is not just about rescuing property

0:27:550:28:02

developers, this is about trying to ensure that the Northern Ireland

0:28:020:28:07

economy and those businesses caught up in this whole web of property

0:28:070:28:16

speculation on not affected in a way which adds to our economic woes.

0:28:160:28:21

Northern Ireland's future has been mortgaged to the Republic. The

0:28:210:28:25

Republic's future has been mortgaged to Europe. Can we really

0:28:250:28:29

expect preferential treatment from a state where its citizens are

0:28:290:28:34

The property crash has left a generation in Northern Ireland blighted by debt. Their homes are worth less than their mortgages. The crash has left the Republic's 'bad bank' NAMA as Northern Ireland's biggest property player, controlling billions in assets. BBC Northern Ireland's Economics Editor Jim Fitzpatrick investigates the fall out from the biggest economic shock in recent history and how it will affect all our lives for years to come.


Download Subtitles

SRT

ASS