NAMA - Safe as Houses Spotlight


NAMA - Safe as Houses

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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also defines the unprecedented scale of our property crash.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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A far cry from 2007 when their previous auction sold property

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

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

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

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

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properties are repossessions which are on the up. Misery for

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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structure is maintained by British and Irish governments. When the

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

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

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

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

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

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

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

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

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

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

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of debt will be important no everyone in Northern Ireland over

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

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

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developments and undeveloped land totalling �3.35 billion. It would

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

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

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

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

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

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

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

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

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government effectively calls the shots in their property market.

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

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

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

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

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

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

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

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

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The problem comes when a property developer gets into the situation

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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manufacturing investment that would bring jobs is stalled because the

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

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

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

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could employ people? Yes, and manufacturing company that is

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

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

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

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

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will definitely go bust as NAMA takes decisions. Many businesses

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

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

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those loans could kill or otherwise healthy companies. That his

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

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

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

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

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

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

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

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

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

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expensive tourism project ever. The company building it arose NAMA

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

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

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

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

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

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

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

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

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

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

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

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is liquidate. Conner makes his living negotiating

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

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

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

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

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

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

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

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generations, Unionists in Northern Ireland have feared doubling from

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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like to get industrial development going but NAMA is not discussing

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

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I will not discuss the particular case because of confidentiality but

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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million commitment for road up grading. As NAMA gets more

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

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

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good and important that we keep political relations with the

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

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

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

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

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

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

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

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

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

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

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

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

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

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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

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