27/05/2012: RPPI for April 2012: Implications for Nama

In the previous post I looked at the potential changes in the trends relating the RPPI and its components. Now - a quick update, as usual on implications of April Residential Property Price Index on Nama valuations.

Please keep in mind two things: 1) this relates only to residential property and is not fully reflective of the entire Nama portfolio, as both selection effects and portfolio composition effects would introduce significant differential for Nama actual losses, 2) LTEV and burden sharing assumptions apply in terms of averages, not specific to each type of property covered here. In other words, these numbers are simply comparative approximations and not exact forecasts of Nama losses.

• Overall residential property price index has posted a decline of 49.89% on peak in April 2012. This corresponds to a decline of 36.7% on Nama LTEV valuations and 33.67% decline on Nama valuations inclusive of LTEV and net of burden sharing.
• Recall that Nama first called 'the bottom' for property markets to occur at the end of Q1 2010. Alas, since then property prices have fallen - on aggregate - 27.09%.
• Nama holds some houses. These are now down 48.41% on peak and 36.31% down on Nama cut-off valuation date, implying a decline of 33.27% on Nama valuations inclusive of LTEV and burden-sharing.
• Nama holds loads of apartments, which are down 59.07% on peak and 41.13% down on Nama cut-off valuation date, implying that these are down 38.33% on Nama valuations inclusive of LTEV and burden-sharing.

Some pretty big figures out there.

2/3/2012: Nama valuations - January 2012 update

In the previous post I looked at the latest data on residential property prices (link here). Here, let's update the Nama valuations numbers based on January 2012 property prices data.

Table below summarizes referencing of January 2012 numbers to two different dates: November 30, 2009  - the cut-off date for Nama market value assessments, and Q1 2010 - the first time Nama tried to call property market 'bottom'. So 'Loss' on nama book valuations refers to the percentage difference between the cut-off date value of properties and current value of properties according to RPPI - please note, this is an economic loss - not an actual loss to be provisioned for. Nama valuations inaccuracy index is reflection of Nama prediction - implicitly reflected in its business plans - that the property market in Ireland will bottom out in Q1 2010. Weighting to book assumes that on residential portfolio 70% of portfolio in in Apartments and 30% in houses.

Note that in the above I take account of Nama-applied Long-Term Economic Value uplift and net out the subordinated debt cushion of 5% for burden sharing (Nama loss cushion). When you think about it, we are paying six figure salaries to these boffins who are almost 30% wrong in their market predictions just 7 quarters out.