I am advised by NAMA that, although its exposure to residential property in Ireland is limited, it has sought to instigate some market activity through the introduction of a deferred payment initiative, which offers downside price protection for a period of up to five years to buyers. The initiative, which is referred to as the 80/20 Deferred Payment Initiative, was formally launched in October, after an earlier pilot scheme, in respect of an initial 295 houses in 12 counties nationally. NAMA advises that to date sales have been agreed on 115 of these properties with an aggregate value in excess of €20 million. In the past week the NAMA Chairman in a public address stated that, based on the interest to date, NAMA may shortly announce a further increase in the number of properties included in the initiative. NAMA has previously indicated that the initiative will be extended on a phased basis up to a maximum of 750 properties. Under the initiative, home buyers pay 80% of the property’s value upfront. The remaining amount, up to 20% of the property’s value, will be paid in five years by the mortgage provider on behalf of the home buyer directly to NAMA. This will be calculated based on an independent assessment of the property’s value at that time. Example scenarios are set out on NAMA’s website, http://www.nama.ie/about-our-work/deferred-payment-initiative/.
As the initiative offers the buyer protection from the risk of further house price declines for the first five years of the mortgage, it is not possible at this stage to estimate the potential loss, if any, to NAMA arising from this initiative. However, NAMA advises that any potential future loss is more than offset by the generation of transactions, and therefore the monetisation of NAMA residential property, under the initiative that might not otherwise take place in today’s market place and by the wider benefit for the property market and the economy from increased transitional activity in the market. NAMA considers that part of its objective is to contribute in a tangible way to sustainable recovery in the Irish property market and by extension the wider Irish economy.