NAMA in Blunderland

Come with me once again down the rabbit hole well trodden by Irish property developers and their enablers in Irish banks and the Irish state bodies.

Our hero today is Killiney solicitor Brian O'Donnell, a man who somehow managed to leverage his business in just over a decade to the point where he was buying Washington skyscrapers overlooking the White House, entire buildings in London's Canary Wharf and Stockholm's biggest office block.

Of course, the money for these nine-figure purchases was largely borrowed from banks. And now they'd like it back. Bank of Ireland is looking for around €70 million from O'Donnell and his doctor wife. But that's dwarfed by their total property debts of over $1 billion.

So far, so Celtic Tiger collapse. But what's especially hallucinogenic about this case is not only the massive amount of money that the banks leant to a lawyer and a doctor to buy skyscrapers all around the world. What's really, really straining the limits of credibility is the fact that our hero is currently on a panel to advise NAMA.

Needless to say, like all good state agencies, NAMA is spunking absolute fortunes of state money at lawyers. The agency is expected to hand over €260 million to legal eagles over the course of the next decade. That's a quarter of a billion euro of OUR MONEY.

And who are these incredibly expensive legal advisors? Well, 64 firms have been appointed to a panel to share the booty. And unbelievably, Brian 'Billion in the hole' O'Donnell is one of them.

Let us pause for a moment to catch our collective breath at this audacity.

Somehow a lawyer managed to persuade the banks to loan him not a few hundred grand for a couple of buy-to-lets, nor even a couple of mill for an apartment block, but one BILLION dollars for skyscrapers.

Then it all went tits up for property, and now the banks want their cash back and are suing to get it. O'Donnell being a lawyer, is obviously fighting it. Fighting in court is what he does well, unlike investing in property.

Meanwhile, the state via it's impaired bank loans vehicle NAMA is doing the best it can to bail out the poor developers and the banks who got burnt went property went poof.

And of course, this is inevitably a bonanza for lawyers, as all state agency activities tend to be. But the incredible chutzpah, the sheer gall of all involved to appoint a lawyer to this advisory panel, which will pocket quarter of a billion in fees, who himself got spectacularly burnt and is in debt to the tune of $1 billion on property, is staggering.

Let's go over it one more time, real slow: NAMA has decided it is appropriate to take legal advice on handling their crappy property loans from someone who themselves owe a billion bucks to the banks on property deals.

They're either mad as a hatter, or they've been chewing on the wrong side of the mushrooms. And they've obviously stopped even caring about what they do or how it looks to us poor pleb mugs who just had our entire futures mortgaged to the IMF to pay for all of this mess.

Top Quality Property Porn

I love property porn. You know the stuff: it comes in a colour supplement in your weekly regional paper that's longer than the paper itself is.

Before they get to the actual adverts, which funds the whole thing, there's a few pages of blatant fluff masquerading as reviews of newly available property.

No matter what the economic climate, never mind if there is an enormous property bubble popping around your ears, what you'll read in property porn is always universally positive.

If prices are collapsing, then property porn will tell you 'this house should be of interest to investors and first time buyers, offering unprecedented affordability in this much sought-after area."

If it's a derelict flat in a slum redlight district, it will be described as "offering a unique opportunity for a developer in an up-and-coming area of town."

If you're particularly gullible or unintelligent, you may not have worked out that all this property porn is either directly written by the estate agents themselves or else has been lightly adapted by hacks and shills masquerading as journalists.

But most of us are a lot smarter than to be taken in by this gushing, lying, overwritten shite about shoddy, sub-standard, overpriced housing.

It's a lot of fun noting how shrill and desperate the tone of property porn has become, how the page lengths are dropping alongside the prices, and how terrifyingly upbeat the tone remains, reminiscent of the grin on the face of a Club Med holiday rep watching helpless as a load of boozed-up lager louts pick her up to throw her into the pool.

But even more fun is this hilarious pastiche of a contemporary property ad, produced by Maxdiver, one of the regular posters on HousePriceCrash:

Great new property investment schemes now available. You've seen it on TV - now experience the joys of Property Investment.

With Mulligan Property Investors all your dreams can come true. In the North Coast's most popular investment Village - Causeway Glen a new way of life is coming. A great new development will be opened in 2009 - and it's surely the most popular residential concept Northern Ireland has ever seen.

The demand for these great Nest Egg investments has been extraordinary. With all units having been snapped up within minutes of having been up on sale - we aren't making this up. But don't worry - you can still get in on the action.

To help the savvy beginning professional Property Investor get rich quick we Mulligan Property Investors are giving 1,000 lucky investors who thought they missed out on the bargain of a lifetime - the chance to share in the success of Causeway Glen.

Listen to this great deal: For someone starting out in the making money business, Pay only £500 per month + the cost of the £249,950 loan for a 1 bedroom town house and you will buy this great high quality life-style investment in 2009 when the development is complete for the same £250k.

Prices range from £249,950 for chic 1-bedroom town houses to £1,499,950 for a 6 bedroom Mansion with Double Garage.

You stand to benefit enormously from this limited offer - with house prices having risen and according to respected commentators in the media - to keep on increasing - you need to sign up with us today.

Imagine how great it will feel - knowing that for only £500 per month you can share in ever growing prosperity.

Hurry - this is a limited offer - and any Property Investor worth their salt is rubbing their hands with glee.

And if that isn't enough - all investors will recieve a free iPod shuffle and 10% off the cost of fitting upstairs curtains!

MPI have over 100 years experience in making people fabulously wealthy through property - with over 30 eager staff - give us a call and see if you are the type of person who knows a good deal when they see it. Call us now on 02890-xxxxxx. You'll be glad you did.

Living in denial - The property bubble

Living in denial seems to be one of the most common pastimes these days.

In fact, it's probably the third most common pastime in Ireland today, behind slumping in front of the telly to watch CSI: Miami and slurping wine with friends while comparing the notional values of their overseas property portfolios.

I thought it might be useful to run through a few known facts that people are living in denial of in Ireland today, just as a reminder and in the vain hope that some people might snap out of their torpor and face up to some of the scary realities that await us all.
Today, we'll kick off with a biggie - the Irish property market.

Irish property prices are about to collapse, because it is the biggest bubble in the global property market bubble. Yes, people have been predicting this for years, and with good reason. It is inevitable. No, it hasn't happened so far, but that just means the crash will be more severe when it occurs, which is very, very soon.

That one bed apartment you bought within a mere hour's commuting distance of Dublin city centre (if you leave for work at 4am) will not continue to inexorably rise from the half million euros you bought it for.

The reason for this is because it is simply not worth anything like that amount in real terms.

Let's look at the fundamentals of this market. Historically, the average family house anywhere was thought to be worth approximately three times the average industrial wage. In Ireland, accommodation now is a factor of around 12 times the average industrial wage.

Also, the US property market has just tanked, and Ireland's exposure to America makes us particularly vulnerable to economic developments there.

Finally, didn't you notice that the only people talking up house prices are those with vested interests in selling them? Auctioneers (recently demonstrated on Prime Time to be utter cowboys), Estate Agents (who increasingly and quietly have been selling their own houses and renting), and newspapers (whose lucrative property sections which shrilly trumpet new developments are dependent on the advertising from those same developers).

Get out now if you can. Banks have already divested themselves both of their own property (HQs and bank branches) and of their property debt. The clever speculators left the Irish market at least a year ago.

This is a pass-the-parcel game where the last one holding the overpriced package will see it explode messily, devastating their finances and personal security.

Indications from data gleaned from popular sales and letting website Daft.ie show that more and more places are on the market longer, being repeatedly listed at ever lower prices and that a full crash is imminent.

There has never been a soft-landing in a bubble market. There wasn't one with Dutch tulips or South Sea stocks, there isn't one in the US housing market now or the London and Tokyo bubbles from previous decades, and there won't be one in Ireland now.

The market will crash, perhaps by as much as 30% in one year. If you are still in doubt, cast an eye over the excellent web analysis conducted at Daftwatch, and the informed discussions on The Property Pin.

Prices in London took the best part of a decade to recover from their crash in the late Eighties. Prices in Tokyo took even longer to recover. Prices in Ireland are more inflated now than either of those markets ever were.

If you've just taken out a large mortgage, you could be trapped in the property you've just bought for a decade or more, in order to avoid negative equity.

If you have a string of properties, each leveraged off the back of notional equity increases in previous properties, you are extremely exposed and could even find yourself close to bankrupcy like this fella.

The party's over and normal rules of engagement are about to resume, people. Which is good in the long term for all those unable to purchase their own dwelling, but very bad news for those seeking to make money by sitting on their backsides.