NI HOUSING MARKET IN RECOVERY - DONT TELL JOHN !

Yesterday on the Andrew Marr show, the new very slick and articulate Bank of England boss Mark Carney, went on the record to declare that the housing market in the UK was firmly in the recovery mode . . .except for Northern Ireland. This prompted a response last night from our Finance Minister and local economists today that Mt Carney must have been looking at the wrong data. In short and for the lay man the data in NI for the past 12 months has shown that there has been a very marginal increase in house prices in the region  of 2/3%.  Not a great deal but after 6 years of declining house prices of up to 50%, most people would take that.  So technically I would agree with the Norn Irn viewpoint that maybe on this occasion Mr Carney dropped the ball ever so slightly.

I am a chartered surveyor myself and worked as a commercial property consultant for over ten years.  I worked with many incredible people in the property market and got a real good grounding in business.  I cut my teeth in the noughties, when it seemed like every other person in Belfast was driving a Range Rover, suited and booted to the nines, and running around socialising at Down Royal.  It seems a long time ago now, but was only in 2005/2006, so not that long ago really.  How times have changed.  The Bentleys have gone, helicopters decommissioned, even the all year round tans have gone by a lot of the ones who had a great few years,  Another noticeable occurrence of the last few years has been the fact that the estate agents have been very quiet.  Many estate agents have went out of business, sold their business, have had problems within their business, etc etc, such a far cry form only a few years earlier when they were investing in their businesses and making a lot of money.

In the past six months though we have seen the return of the agent.  The slicker ones have their teeth whitened again, new suits, dazzling shiny shoes and beautiful cars to boot.  They are happy to tell you the market is back, houses are flying out the door and in fact there are now bidding wars according to one agent on radio today.  Bidding wars - I think I remember what they where??  This is all fine but I feel at times this type of reporting can be counter productive and too salesy!!

Anyhow, what I would say is we all need a sense of perspective in this country and in Republic of Ireland when talking about any kind of housing market recovery.  Yes there is now finally activity in the housing market, yes people are now putting their properties on the market and yes things are starting to move, however I wouldn't be clicking the champagne glasses anytime soon celebrating a full blown recovery in the housing market.  What I would say in my professional opinion, there will continue to be a serious correction of house prices up to 2016 as the banks maintain their policy of clearing the decks regarding property.

Let me explain :: I have a friend and for these purposes his name will be John.  John has a young family and bought a lovely house in Bangor around 2007 for £400,000.  He spent another £75,000 doing the house up before he would move in.  He has a mortgage of £425,000 today and its just went from a fixed rate payment of £1000 a month to variable rate of £1700.00 per month.  Johns hit financial trouble in the last two years as he was a professional and he lost his job.  He is now doing some contract work but every month is a struggle.  He stopped paying his mortgage last year and had to place his property on the market.  Johns house is agreed at £200,000.  If the sale goes through John will still owe the bank £225,000.  Not a nice situation, and John is weighing up his options.
My point here is there are 1000's of Johns across the country who are part of the negative equity club.  Overwhelmed by debt and struggling to fill the oil tank and provide for their families every month. Most people like John belong to the coping classes, and many of them are professionals like teachers, doctors, dentists, vets etc etc.... all living month to month doing the 4 o clock walk a few nights a week for good measure, stressed our of their wits - not good at all!!  

The big issue in N Ireland is DEBT, and sad fact is our our local government have no idea how big a problem this debt issue is for households.  They have no data on this unlike the Republic of Ireland and I find this incredible.  How are you going to fix a problem if you don't even know what it is... playschool economics by Stormont at the highest level.

Its great that finally we have some movement in the housing market.  Mostly in the sub £150,000 band, as houses over this price are still hard to shift.  If credit is to be come more readily available in the months a years ahead (hopefully) we should see this trend in the market continue.

Yes there is definitely a mood change in the market, and as we are nearly through the first quarter of 2014, lets hope this continues.  However I have always said that we will not have any form of consistent recovery, to our banks start getting involved in lending again.  This could be some time yet. 

A housing market recovery... just a little yes, but do me a favour, please don't be mentioning it to John!!

Conor Devine MRICS

PIMCO AFTER NAMA NI DEBT BOOK

It was reported today by the Irish Times that PIMCO, one of the worlds largest Real Estate Companies has made tentative approaches to buy NAMA's Northern Ireland loans portfolio.  Although none of the parties have confirmed or denied the story it is certainly a very interesting development in the world that is NAMA..
Effectively NAMA, the worlds largest property company, acquired up to £4bn worth of loans from Irish banks that related to Northern Irish borrowers.  On the face of it this is a considerable amount of property loans.  Rough guesstimates are valuing these loans today at around £1bn, which is still quite a substantial amount of money and real estate.  The million dollar question now is, What is NAMA going to do with these loans?  To date, they have done very little in Northern Ireland, only selling a few parcels of land and putting up some working progress money for other schemes.  It would be fair to say that by and large most borrowers have found the NAMA experience very difficult and certainly from an economic point of view, Northern Ireland has not seen much of an upside as there has been little activity within the NI book.

The facts are that NAMA are now very open to selling loans having completed a few loan sales in the South of Ireland recently, and it would appear that selling of the Northern Irish book would be quite desirable on their part and make some sense. 
The next big question therefor is that if a sale of the loan book were to go through, what would that mean for the borrowers.  Very simply their liabilities would fall with the new owner of the loan book, and they would have a new opportunity to come to some form of arrangement / deal on their loans.

I think for the most part, the consensus amongst the property world would be that they would be open to a loan sale, as there has been very little progress made to date with the loans.

From an economic point of view, if the loans to be sold to a PIMCO fro example, and they started to aggressively manage the loans, then that would certainly mean an upturn in economic activity and for us that can only be a positive thing for Northern Ireland.  We can see this thread developing in the weeks and months ahead . . . . . .

Lets watch this space ::

GDP Partnership

GDP PLUGGING THE FUNDING GAP

Only when Bank’s begin to meaningfully engage with small and medium sized businesses (SME) will the UK and Ireland return to a normalised and sustained growth economy. SME’s are the engine room of all economies and perform much better than large companies when it comes to net job creation and technical and business innovation. It is Bank’s which are supposed to provide these SME’s with credit allowing them to grow and do what they do best; create jobs and wealth.

Currently the relationship between Bank’s and SME’s is broken and needs to be mended. This broken relationship has been detailed extensively in the press in past number of years and more recently through the Tomlinson Report and the SWAP miss selling debacle.   Many viable businesses have been put in a very precarious position by their banks of late, for one reason – so the bank could make more money – this is not anecdotal as the banks have paid out billions in fines over past five years and it would appear unfortunately this trend is continuing.

The latest Bank of England figures show that all lending to businesses fell by £4.3bn between September and November 2013. Business lending in 2012 fell by £1.5bn a month on average, in 2013 it fell by £1.1bn a month. A spokesman for the Bank of England also announced that many businesses now prefer to raise money by themselves, rather than taking a loan from a bank – I wonder why this trend is developing.

At GDP we can confirm this as we receive numerous request every week to assist SME’s to raise finance and in the majority of cases our only option is to look for finance outside Banking systems be it through Investment Funds or Private Individuals who are looking a greater return than the small returns being offered by banks. To date GDP has sourced finance for businesses which are performing, profitable and growing. These businesses and their needs were not even entertained by the banks. The banks have been proven wrong as these businesses are now growing, creating jobs and contributing to the economy.  What does this tell us – for me it tells us that one of the main challenges facing our economy in the next five to ten years is access to finance.  It is an area in our business model that we have worked very hard in terms of introducing a solution.  Thankfully we now have a range of investors who are interested in providing funding to SME’s and other opportunities.

This alternative source of funding sourced from non-traditional sources are filling the gap in the economy and allowing some businesses to succeed and thrive. However, alternative lenders ultimately do not have the lending fire power of Banks to stimulate an economy.  We need our banks working again and lending to SME’s and the wider economy if we are to have any sustained form of economic recovery.

At GDP we will continue to assist where we can regarding sourcing and providing funding solutions, but we do need our banks to step up to the plate sooner rather than later.

Louis Waters ACA – Senior Relationship Manager

BANKS ARE WINNING THE WAR....#CONFLICTS OF INTEREST

There is absolutely no question about this, but the banks are winning the war against the borrowers. Its not even close, one by one, systematically, the banks across the land are working their way through their caseload and taking control.
When you stand back and look at it, what other outcome would you expect.  It has become clear since the meltdown in Ireland in 2008, the professionals one by one, realigned themselves with the banks.  Accountants, estate agents and lawyers started to chase the bank work as they worked out that their private client base was running empty on funds. 
Business is business and who can blame them, however having witnessed at first hand how some of the professional companies washed their hands of their once valuable clients, it can be quite sickening. 
2014 has arrived and the old Conflict of Interest debate is in full swing.  It never ceases to amaze me the amount of professional firms who are advising borrowers in the morning and in the afternoon advising the banks how to put the borrowers lights out.  Its absolutely incredible.  In the last few years in GDP we have sat in front of scores of borrowers who have went to professional practises for advice, are then given advice from that firm, then find out in a few months that that firm is then acting for the bank....(wait for it) as an administrator on their businesses assets!!! Incredible stuff.  It would appear that in this dirty old world of property, debt, insolvency - anything goes, and as professional practises are hungry for fees, there is absolutely no let up in this type of activity.

At GDP we took the view that when in the debt advisory business, you either act for the bank, or you act for the borrower - its impossible to give good sound advice to both - you simply cannot do it.  Why is it then that most in this space are doing both - o yes I forgot, "Chinese walls".  Having worked in private practice for over ten years I have to tell you that the old "Chinese Wall" set up, is an illusion - it simply doesn't work, in real life.  The only "Chinese Wall" that does work is a few miles outside Beijing - The Great Wall of China".  I would know as in 2002 I was standing on it with the Irish Soccer team at the world student games admiring the view - a magnificent piece of engineering.

If you find yourself in financial difficulty and you want independent advice, the first question I would recommend you ask the expert you are sitting in front of is - do you work for the bank?  if the answer is yes its probably prudent that you take your business elsewhere.

Conor Devine MRICS   

RBS / ULSTER BANK PROFITEERING THROUGH GRG DEPARTMENT SAYS SERIAL ENTREPRENEUR LAWRENCE TOMLINSON

I had the pleasure of speaking at an event last night with Lawrence Tomlinson, the author of the Tomlinson report into practises at the Royal Bank of Scotland (RBS). Lawrence was at pains all night to ensure that every time he mentioned RBS he also named Ulster Bank. Ulster Bank have for some time maintained that the remit of Lawrence’s report did not extend to their organisation. This was repeatedly rubbished by Lawrence who pointed out that many of the original complaints into the Global Restructuring Group (GRG) were from businesses in Northern Ireland and related specifically to the GRG arm of Ulster Bank.

For those of us dealing with these issues on a daily basis, it reaffirmed what we already knew. The abuses are systematic and institutional and relate directly to activities at Ulster Bank. Ulster and RBS are still adopting the policy of denial, hoping that either Lawrence or the allegations will eventually go away but hopefully the tidal swell of injustice will insure that this doesn’t happen. Lawrence can do little more, he has very bravely brought these matters to the attention of the government but we now need to demand action from that same government.

Business Support Units are now treated as profit centres within RBS. Those people put in place to help and support are now clearly profiteering from your demise. Nowhere is this more apparent than with the use of the rather opaque West Register. We heard of one young banker in GRG who had forty five cases under his control – the norm to restructure would be six or seven but these businesses were only heading one way with his help – bankruptcy, so there was no need for care and attention. None of the forty five cases ever exited GRG. Demoralised, he has thankfully now found something better to do with his life. The statistics are astounding – Of all the business’ that enter GRG, only 6% re-emerge into a performing portfolio.  For a department that is supposed to help, support and restructure that is some appalling success rate. But who wants success when you can generate multiples of fees in distressing the business further and sharing in the ultimate fee fest.

Where will it all end. As with pretty much every financial scandal that I’ve seen, there will be a scapegoat. Either a person or a part of the business that will be thrown to the wolves and the baying media. Either somebody or a unit of the bank will be found to have acted outside of the general ethos and ethics of the bank and will be sacked or closed down. I suggest, in time that it will be GRG itself. It will neither be fair or equitable. RBS will set aside more of the taxpayers money to pay the inevitable complaints, I am reliably informed that they already have lawyers looking at possible civil suits and someone will churn out the usual rhetoric that it was somebody acting alone, is not representative of the bank as a whole and it has been dealt it.

I’ve seen it, heard it a hundred times. I will no more believe it than I did the first time!

The Tomlinson Report is a must read for everyone. Anyone with complaints against RBS or Ulster should keep the wheels in motion and contact either Lawrence or the Financial Complaints Authority (FCA) with their complaint. Banks such as RBS have become too big to fail, they are bullies and we need to stand up to bullies. There is a golden opportunity to break up the bigger banks into more manageable secure units. That time is now and we cannot let the opportunity pass.

Nick Leeson

Anyone with banking challenges can contact us at info@gdpni.com

Insolvency Service of Ireland - A Missed Opportunity

When the Insolvency Service of Ireland (ISI) was launched in the Republic of Ireland amid great fanfare just over 4 months ago, it was trumpeted as a solution to a large chunk of the country’s personal debt problems and gave hope to a huge swathe of people. The new laws had taken over 2 years to devise and were seen as a key element of the Government’s (Troika-influenced) strategy to help the tens of thousands that were swamped by personal and mortgage debt.

Given that the system had taken 2 years to devise and its roll-out delayed several times to make sure all was in order, people would have been forgiven for hoping it would hit the ground running. Instead, it has proved to be an embarrassment for the Government due to the low level of uptake. In advance of its launch on the 9^th September 2013, the ISI indicated that it had already had 4,500 enquiries and was expecting “thousands” to avail of its services and deal with their debt issues. The reality has been starkly different – as of last week, only 11 cases had come before the courts since the ISI opened for business. Whilst some of the blame for the low uptake can be placed on people’s reluctance to be ’first through the gate’ with the new system, it must ultimately be said that the service is not fit for purpose – it is not helping those it promised could avail of it. What makes this fact all the more damning is that such a situation was completely avoidable – there has been a well-run and functioning Insolvency Service operating in the UK for a number of years; why not simply mirror that system as closely as possible? The UK system was not an immediate success but was tweaked accordingly with new protocols introduced that resulted in acceptance rates for cases exceeding 90% - a figure that can only be dreamt of in ROI under the current system, which places the trump card in the hand of the largest creditor (i.e. the bank) in the form of the power of veto.

The salient point is this: the UK system wasn’t perfect; it was amended to rectify its flaws, and now works well. Why weren’t the relevant lessons learnt here and a similar system put in place? The people who have been through the financial mire for the past 5 years and were told that the ISI could solve their problems have been badly let down. The news last week that Justice Minister Alan Shatter is to change the system to make it more like the Individual Voluntary Arrangement (IVA) system in the UK is welcome, but why not do it from the start? This surely amounts to a missed opportunity, for both the Government and the country’s indebted borrowers, as currently people have little or no faith in the ISI. This is evidenced by the low numbers of people looking to it as a viable solution to their problems, and acknowledging the need to amend it 4 months into its lifetime is unlikely to increase confidence in the short term.

The system’s lack of transparency is a huge problem and highlights the fact that the majority of indebted borrowers would be far better off attempting to come to an informal solution with their bank, either directly themselves or through an intermediary. The banks are starting to come around to the idea of doing deals with borrowers as the Central Bank threatens to force them to make special provisions for unsustainable mortgage debt regardless of whether they have come to an agreement with borrowers – the hope is that once the banks realise they are going to take a hit one way or the other, they will approach the personal debt problem in a more realistic and proactive manner. Until then, the economic recovery will remain slow and continue to be hampered by the lack of a viable Insolvency Service.

Fergal Hand Senior Relationship Manager GDP  - Solicitor

BANKS - SMOKE AND MIRRORS

2014, heralded the start of a new year, post GFC (Global Financial Crash). Banking spin has been ratcheted up a notch and if you believe all you hear, we’re on the right track.

In Dublin, the Chief Executive of AIB has told us that the arrears issue will be resolved in two years. In Belfast, a report this morning tells us that there is no demand for credit. So what are we all complaining about?

The truth is that we are fed up being offered ill-conceived ways to reconcile the arrears problem and after five years of being continually refused credit, the majority of people have given up.

David Duffy tells us that the issues of loan arrears, capital adequacy and profitability will be resolved in the Irish Banking Centre in the next two years. The pillar banks will return to profitability during 2014-15 and will be able to pass any stress tests. Great news! Great news for the banks.

AIB are throwing around ten year, zero coupon bonds like confetti at the moment. Sign up to these, comply with the terms and conditions and an amount of your debt will be written off in ten years’ time. I’ve seen many of these ‘bonds’ with six figure sums involved. AIB are compounding as much of the arrears as possible into the existing mortgage as allowed by the reasonable living expenses. The balance is set into the ether, with a sum maturing in ten years. Think of it as a ten year hangover, you’ll feel groggy and not really sure what’s happening for ten years and then the real headache will kick in. You’ll have to immediately repay the amount of the bond.

It makes no sense to anyone other than the bank. It relies on property prices increasing, interest rates not rising and your economic, personal and work situation not deteriorating. They must have a new crystal ball at AIB, as I couldn’t guarantee any of those for you. In ten years’ time, if you are unable to repay, the bank will enforce all of the debt, repossess the house and get a judgement against you. All this after you have been paying on time for ten years. The banks will no longer be under the scrutiny of the Troika, the Central Bank and their balance sheets will allow them to be more aggressive and do as they will. You will be on the scrapheap. To suggest that the arrears issue will be resolved in two years when your own bank is wilfully kicking the can down the road ten years is spin of the highest order.

In Belfast, the Banking Enquiry up at Stormont is drawing some strange testimony. Granted only two banks have given evidence but both would suggest that there is money available to lend. The banks in NI are now saying that the country has a competitive banking market and supply of finance was not the issue. Sorry to be so sceptical but how many customers form part of this enquiry and how many have the banks seen in the past five years. I’m guessing the answer to both is not many. These findings in Northern Ireland contradict those of the Entrepreneur in Residence with David Cameron’s government, Mr Lawrence Tomlinson, who did by chance speak to a large number of bank customers in 2013.  He would have a very different view on this subject matter.

Who should you believe? I’ll let you know in an hour, I’m off to AIB Bank centre to get my palm read, before boarding the train to Belfast to get a loan.

It really is time to take back control, ask questions and challenge what you are being told. Banks are ticking boxes more so than ever before in the past and what is good for the banks is not always good for you.