NIO unable to assess £3.35b in bad loans

DEVELOPERS and property investors acquired over-priced land and houses they couldn't afford - including assets in Londonderry - using cheap credit from now struggling Irish banks during a false NI property boom; the £3.35billion in dodgy loans is now being administered by Dublin's National Asset Management Agency (NAMA).

But the Northern Ireland Office (NIO) was unable to provide a detailed assessment of the assets when quizzed by MPs including the former SDLP leader Mark Durkan at Westminster recently.

NIO Minister of State Mr Hugo Swire rejected a proposal from one Conservative MP that, in light of the United Kingdom's contribution to the bail out of the Irish Republic, Britain should take the assets - 2billion in undeveloped land, 1billion in investments and 350million in property and land in the course of development - "off (the Republic's) hands."

During a recent debate at Westminster Mr Swire said: "We are not in a position to make a detailed assessment of these assets."

But he rejected a proposal by Conservative MP Mark Reckless that the United Kingdom acquire the said assets.

"Given the difficulty NAMA is having in managing these assets and the Republic's already over-indebted situation, would it not make sense for us to take some of those assets off its hands, as consideration for financial support we may give?" asked Mr Reckless.

Mr Swire replied: "My hon. Friend will have an opportunity to make those and other points in the debate on the Loans to Ireland Bill-no doubt he will wish to take part in that.

"I think he should be proud of what we are doing, however. We are now part of the solution rather than the problem, and we believe it is right that we, as a country that has so much trade with the Republic of Ireland, should come to its support at this time, with no conditions."

The Minister also told Foyle MP Mark Durkan that the Treasury was in discussion with the Government in Dublin about NAMA and the way forward.

The Chair of NAMA's Northern Ireland Advisory Committee, Peter Stewart, recently estimated the agency will acquire loans secured on NI assets of approximately 3.35 billion.

Mr Stewart said that the final figure would not be confirmed until the loan acquisition phase for NAMA was completed and therefore, the 3.35 billion was a "qualified estimate."

He said Northern Ireland had its own property bubble in undeveloped land quoting estimates from CBRE in Belfast which suggested the normal market for land sales in Northern Ireland in the years 2000 to 2005 was approximately 100 million per annum but that this figure spiked to 750 million in the years 2006 and 2007.

Mr Stewart said that while NAMA did not have to sell "today, this month or this year" it does have to operate to a ten year time scale.

He warned: "even over such a period of time it is likely that we will see what was previously viewed as potential development land being sold to go back to farm land.

"For those builders, developers and also land traders and speculators who got caught up in the frenzy, unfortunately there is going to be financial pain."

In relation to residential development properties, Mr Stewart said that unlike the South: "in this part of the island (NI], there does not appear to be a huge supply overhang of residential properties."


The investment property market, however, echoed the experience of the undeveloped land market with a rise in the normal value of transactions from a typical 200 million per annum to a peak of close to 1 billion in 2006 and 2007.

Whilst Mr Stewart warned developers: "Debtors have an opportunity through working with NAMA to make some amends for the damage that has been done and to avoid enforcement proceedings."

He warned where it was necessary to take go through the full process of enforcement proceedings: "They will be taken – regardless of jurisdiction."

Mr Stewart said that NAMA was acutely aware of the particular sensitivities of the Northern Ireland economy and market: "What we must do, and which is in our interest as well as that of the Northern Ireland economy, is to carefully manage the impact of the ending of the false boom in property values."

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