NAMA takes a risk at the right time
nAMA denies it's gambling on future house price trends. If it gets it right, the tax payer wins. If house prices continue to fall and NAMA gets it wrong, then people who buy NAMA homes this year will win as NAMA will write-off up to 20pc of their prices.
Such buyers will have had the use of a house for five years rent free and not suffered negative equity. In a way they'll have had their cake and eaten it.
On the other hand if prices rise, then everyone's a winner -- taxpayers, NAMA and this year's buyers. As the saying goes; "You pays your money and takes your chances."
Instead of gambling, NAMA says, it is taking a very managed risk and like good risk managers they have timed their strategy well.
Its new scheme comes only a few weeks after the CSO index shows prices are stabilising and may even be rising in Dublin. May is usually the most active month in the market. NAMA's scheme also comes only days after a Central Bank report showed some house prices may have fallen too low.
While some commentators are sceptical of the Central Bank report, there is also some other evidence, albeit anecdotal, that prices have fallen too low.
For example some Dublin agents and buyers have acknowledged that private treaty sales in Dublin have seen some houses selling for above their asking prices. Competitive bidding driven by pent-up demand for reasonably priced family houses has seen such sales in those sought after areas where supply is tight.
In such areas some houses in need of refurbishment which are also keenly priced are selling above their asking prices
It should also be noted that some of the high-profile house price surveys base their data on website asking prices. So those that sell above askign prices are not reflected in their surveys.
Davy stockbrokers recently published a paper acknowledging that prices have corrected as its analysis of the recent Allsop space auction showed that prices have fallen by 60pc. Nevertheless Davys still predict that prices may fall further to between 65-70pc from peak.
However the stockbrokers also acknowledge that affordability has improved considerably, with house prices around 2.9 times disposable earnings. This compares to the much higher long-term average price of 3.5 disposable eanrings.
Some agents have also been slow to mark up asking prices to levels which reflect sale prices for similar properties because they are afraid such increases might deter value conscious bargain hunters from bothering to bid.
This is not to say that some prices aren't falling. It may simply be that the overly low asking prices reflect a change in sales strategy. During the first few years of the downturn agents were asking 10 to 30pc over the price they were willing to sell for. Now for those serious about selling, they are following the trend set by the successful auctions and setting low asking prices to attract in order to attract bidders and generate compeition which generate better prices.
Whatever about private vendors and foreign bank disposals let's hope for all our sake that NAMA's gamble pays off. Already there are signs that it may have got its priciing right. Agents DNG report that within 48 hours of NAMA's launches, two buyers have placed deposits on four bedroom houses at Carrickmines Manor in Dublin 18.