Tuesday 13 November 2018

Nama boss warns on potential impact of interest rate rises on property market

(Stock picture)
(Stock picture)
Gavin McLoughlin

Gavin McLoughlin

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

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

The rate rises will mean debt becomes more expensive and other asset classes might become more appealing.

The US Fed has begun hiking rates and is tonight due to announce whether it is going to hike rates again.

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

Ending the programme is seen as a precursor to a 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.

He said Nama was assessing whether to go and look for planning again. Mr McDonagh also said that 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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