Dáil Éireann Debate, Tuesday - 6 February 2018
133. Deputy Pearse Doherty asked the Minister for Finance his views on the reliance since 2012 on commercial mortgage backed securities, CMBS, by some property investment funds operating here; and if his Department conducted risk analysis as to the exposure of the property market here to CMBS. [5344/18]
View answerIn respect of commercial property funds, the Central Bank is responsible for the authorisation and supervision of all investment funds established in Ireland. In conjunction with the Central Bank, my Department continually monitors developments in the commercial property sector. This includes tracking investment, transactions and the profile of market participants. In addition, last year’s International Monetary Fund Article IV report assessed the commercial property market as performing strongly. The Central Bank’s Macro Financial Review, published biannually, contains detailed analysis of the commercial property market, including important information on the vacancy rate, rent/competitiveness pressures, and the funding sources of investments.
The supply of funding for commercial property development is important to maintain our international competitiveness and as such the funding for the market should preferably be drawn from a variety of sources. The use of a wide range of international funding models, including potential structures like commercial mortgage backed securities (CMBS), has been particularly important in supporting the necessary deleveraging of the Irish State and economy through National Asset Management Agency (NAMA) and Irish Bank Resolution Corporation (IBRC) sales.
The aforementioned analyses illustrate a market that is currently seeing strong demand and a supply response, which is primarily being funded (70%) by foreign investors. These analyses and the balance of risks across the property sector informed my decision in Budget 2018 to increase the rate of Stamp Duty on Non-Residential Property from 2% to 6%.
In terms of additional analysis, my Department works with the Central Bank and the National Treasury Management Agency on the Financial Stability Group (FSG), which monitors a wide range of risks to financial stability. The FSG’s emphasis is on forward-looking assessments of financial stability with a particular focus on identifying risks. The FSG’s work programme for 2018 is currently being finalised and work on commercial real estate is being considered as part of that work programme. This emphasis is in line with the recommendations of the Banking Inquiry and the IMF’s 2016 assessment of the Irish financial sector.
