Chaos in Property Market Set to Continue
So what's really going on in the Irish property market? Well one thing is for sure, the estate agents are busy again and making money. All of the commercial firms across the island are recruiting, getting busier and selling property again. The property market stopped almost immediately after the fall of Lehman Brothers in 2008 and the subsequent GFC, and for a period of six years very little activity occurred. However, in the last 18 months, we have started to see movement again as the banks continue to offload assets and more recently pool loans together into baskets and sell them off, like Project Stone, Project Eagle and Project Button. It sounds very military and it sort of is, as the banks have continued to deleverage and get the property assets off their books. In the three projects mentioned alone there are over £2bn worth of loans sold - incredible stuff really and all in the last 6 months.
So I would concur that the property market is fairly chaotic at present with lots of private equity houses circling Irish skies like hawks seeking prey, and the borrowers who owned a lot of the property running out of ideas and money in terms of how to keep their businesses and properties afloat.
The important point to note here is the change in ownership of our buildings in this country. In 2007, if you walked around Belfast City Centre, I would have been able to tell you who owned what as all of the real estate was locally owned by local property people/investors. However, the same cannot be said today as many of these high quality buildings have been bought over by property funds and institutions. This is a significant development and a sign of the times, really. As many borrowers have been hit by the property crash, the bank moves in and sells the building - end of story. It is likely that the ownership of our main commercial buildings will remain in foreign hands for a few years yet, until banks get their balance sheets in a form of order and start lending again. When this happens, the foreign investors will sell the properties back to the Irish investor. I don't see this happening for quite a few years, and it may be a generation until we see local people in control of some of our finest buildings.
As we all know, NAMA exited the Northern Ireland market in April, deciding enough was enough and selling the entire portfolio to Cerberus - an American real estate company. For me, this is a very positive development for all of us as with NAMA, nothing was happening nor likely to happen that would have had a positive effect on the economy. The Cerberus deal will kick the market on again, as these guys will be looking to exit Northern Ireland in a maximum 5 years. That's only 60 months and with a portfolio consisting of more than £1bn of property, there is plenty of work ahead, which will have a positive effect on the Northern Ireland economy including the much maligned construction industry.
So its all go on the property front, and the good news is that GDP are well positioned to continue to bring solutions to our clients in this space. The future certainly looks interesting, and unpredictable to a certain extent, but there are opportunities aplenty.