Sunday 21 April 2019

Nama boss warns of interest rate hit to property market

Nama CEO Brendan McDonagh
Nama CEO Brendan McDonagh
Gavin McLoughlin

Gavin McLoughlin

Nama boss Brendan McDonagh has warned about the potential impact of interest rate rises on the property market.

The Nama CEO said property will become less attractive to investors as interest rates begin to rise.

The rate increases will mean debt becomes more expensive and other asset options might become more appealing.

The US Fed has begun hiking rates and was last night due to announce whether it was going to up them again.

In Europe, the European Central Bank is today expected to announce its plans for ending a massive bond-buying programme.

Ending the programme is seen as a precursor to an interest rate hike as the continent seeks to move on from the financial crisis.

"Quantitative easing has produced investment behaviour which is unprecedented in the property market - and that's not just in Ireland," Mr McDonagh said. "I think you have to be realistic. When interest rates start rising then property values might stagnate or go down because people look for alternative investments."

But he said that this was not a concern for the near term.

Mr McDonagh was speaking as Nama launched its annual report for 2017.

It has lifted its projected lifetime surplus to €3.5bn from €3bn. The surplus is the difference between the amount Nama paid to buy bad loans from the banks and the money realised from those loans.

Mr McDonagh said Nama had funded the construction of 7,300 new homes between the start of 2014 and the end of May 2018.

He said another 3,800 units are under construction or have had funding approved

Mr McDonagh said Nama had twice been refused planning for a site in south Dublin, describing this as "a bit surprising", but adding that he respected the planning system.

Nama was assessing whether to look for planning again.

Mr McDonagh also said the new vacant site levy has begun to "focus the mind" for land owners who had not yet begun building on sites.

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