Bank offers properties for sale at 70% less than 2007 values

Bank offers properties for sale at 70% less than 2007 values

Royal Bank of Scotland Plc, parent company of Ulster bank, is selling a portfolio of Irish properties at 30% of their previous value. This is an example of how much the market has fallen and the effect that the lack of available finance is having on values.

 

Bank of Scotland(Ireland) and Ulster Bank are seemly prepared to settle for discounts of 75 to 80 per cent on prime hotels such as Parknasilla,FotaIslandand theBurlington.

 

Further evidence of the lack of funding can be seen from Nama’s sale of a retail portfolio in Galway for €27 million, in which Nama provided the funding to the buyer, with a net yield of 8.7%.

 

With such high yields, many of these assets could achieve deliver higher prices if funding was available. In some cases, the owners of the properties could repay loan values higher than the net or even gross sales prices being achieved by the banks receivers.

 

Without funding in the market, either by new lending from the banks, vendor financing or restructuring existing debtors, it will take a long time for the market to improve and until the market improves, banks capitalisation will continue to be an issue.

 

Is that classic “Catch 22” or “Chicken and Egg”?