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News : Irish Last Updated: Feb 25, 2013 - 7:19 AM

Monday Newspaper Review - Irish Business News and International Stories - - February 25, 2013
By Finfacts Team
Feb 25, 2013 - 7:15 AM

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The Irish Independent reports that developers have started selling new homes off plans for the first time in more than five years, the newspaper has revealed.

The ongoing recovery in city property markets combined with a bottleneck in the supply of family-sized homes means deposits are being put down in advance of construction for more than 100 new homes worth €23m in five developments in the greater Dublin area.

Deposits of €5,000 are being put on homes that are selling for between €200,000 and €400,000. The trend follows a period since 2008 in which almost no new homes were sold.

Estate agents said the revival of advance sales is down to a shortage of family-sized properties close to city areas caused, in part, by negative equity.

The latter is preventing those who bought in the boom from selling and preventing second-hand property coming to market. The revival of advance sales also coincides with the publication today of a market sentiment study by Daft.ie showing that, for the first time since the crash, more than half of those surveyed (59pc) believed property prices presented good value.

The survey indicated an 8pc increase in those wishing to buy – and that they expected to pay an average of €229,000.

Estate agents say the revival in advance bookings began after the summer in response to an ongoing shortage of family-sized homes flagged by the industry since the beginning of last year.

In at least one scheme, prospective buyers have been paying deposits for homes that haven't even received full planning permission, a practice which was unheard of even in the boom years.

At another development, new home prices have started to rise in reaction to demand.

At the Peyton scheme off Stoney Lane in Rathcoole, Co Dublin, Blackchurch Homes has taken 13 deposits since the beginning of the year for €265,000 three-bedroom homes in the final phase, which have yet to obtain planning clearance.

Glenn Burrell, of Finnegan Menton, the agency selling the properties, said the deposit system was the fairest way of ensuring buyers could reserve a home in the last phase. If the scheme doesn't get permission, they'll get their money back.

"Since the start of the year, the show houses have been really busy and we'd often have three couples waiting to see an agent.

"Our buyers have been split almost 50/50 between Irish people and non-nationals and buyers have either been working in the civil service or in the tech, pharma or financial sectors. They're looking for family-sized homes and have a preference for new property."

Elsewhere, Coonan Auctioneers says it has sold 55 homes off plan since last year in areas such as Maynooth, Celbridge and Kilcock. "Within 25 miles of Dublin there is strong demand for new family-sized homes and, in our case, its usually people with an affiliation to the area or else to west Dublin generally," said Will Coonan, who cites sales ahead of construction at Castlepark, Moyglare Hall and Griffin Rath in Maynooth, Hazelwood in Celbridge and Ryebridge in Kilcock.

In reaction to demand, the prices for the four-bedroom homes at Castlepark have risen from €380,000 to €400,000, another first since the property crash.

Meanwhile, Savills has sold 20 family homes off plan at The Grove in Lucan, with three-beds priced from around €200,000.

Savills director Ronan O'Driscoll said: "Most of the big boom-era developers have been wiped out financially and the new homes being developed today in response to the shortage are being built mostly by long-established firms who took a sensibly cautious approach during the boom years and didn't get carried away."

A report last week by housing market economist Ronan Lyons, in association with the Irish Banking Federation, cited negative equity as one of the reasons behind an emerging jam in the market.

The Irish Independent also reports that the Government plans to introduce substantial pay cuts for public servants earning over €65,000 in a move that is non-negotiable, unions have been told.

Details of the cutoff point for the wage reductions emerged as four unions staged a walkout from talks on a new Croke Park deal last night, saying they could not sign up to the proposals on the table.

But the dramatic 11th-hour exit is not thought to be a fatal blow to the negotiations.

Despite the departures of the Irish Nurses and Midwives Organisation (INMO), the Irish Medical Organisation (IMO), the Civil and Public Services Union (CPSU) and UNITE, senior government sources remained confident that agreement would be reached as long as larger unions, such as SIPTU, IMPACT and the Irish National Teachers Organisation (INTO) stayed at the table. The Irish Independent has learned a key part of the emerging deal would see state employees earning more than €65,000 facing cuts. Although the extent of the wage cuts was still being decided, sources indicated that it could be in the region of 5pc- 10pc.

This element of the package was non-negotiable and would be imposed as a ministerial decision, according to informed sources. The measure will affect more than 40,000 public servants.

It would see some of these public servants having their wages reduced by stepping back on the pay increment scale, while others would face a straight pay cut.

Insiders said the Government tabled plans for pay cuts for those earning between €60,000 and €70,000.

Another key measure gaining traction at the talks is an increase in working hours for public servants.

Those working 35 hours or less will see their working hours increase to 37 hours.

Those doing more than 35 hours a week will see their week increase to 39 hours.

But those already working 39 hours will see their hours remain the same.

If those working more than 35 hours work overtime, one hour of this will be unpaid.

Staff can choose to stay on their current hours but will lose pay to make up for the extra working time. The Government had initially tabled plans for public servants hours to rise by five a week, but have now softened that proposal.

The leadership of the four unions who walked out of the talks said they left because they believed the Government was unwilling to compromise "in any way".

INMO general secretary Liam Doran said efforts to maintain his members pay "fell on deaf ears".

CPSU general secretary Eoin Ronayne said: "This Government is simply going too far. The proposals are unworkable, they are too extreme, too deep, and too wide."

IMO director of industrial relations Steve Tweed warned: "The Government should not underestimate the strength of feeling out there and how strongly people will resist pay cuts."

Unite official Tom Fitzgerald said he had withdrawn from the talks as he had no mandate from his members for concessionary discussions.

"People can't afford it. It is just not there," he said.

The Government is determined to press on with the talks, despite last night's walkout.

Nobody was willing to predict if there would be an agreement by the time the deadline arrives at the end of the month.

But coalition sources weren't surprised by the departure of the unions from the talks and said there was nothing new on the table to prompt a walkout at this time. And it was regarded as too early to assess if the departure would mean the talks would now slow down or actually speed up as a result of the departures.

Although SIPTU president Jack O'Connor warned of going "to war" if a reasonable deal on public sector pay is not reached, the Government side noted he was staying in the talks.

"This is a negotiation. You are going to see some movement on both sides. It's like a jigsaw. Until you put the last piece in and see how they relate to each other, you don't know," a senior source said.

In particular, the INMO's stance was viewed as unsurprising.

"Liam Doran has been pretty clear on a message of 'not a penny' on the premium pay side. The Government is clear that is not viable. He stayed in long enough to say he stayed in long enough."

The Irish Times reports that sterling is expected to come under strong pressure on international financial markets today, following the decision by ratings agency Moody’s to downgrade the UK’s triple-A rating for the first time in 25 years.

However, the cost of servicing the UK’s £1 trillion national debt is not expected to rise significantly, but only because a third of it is now held by Bank of England, which will not be selling.

Moody’s downgrade was not a surprise, although its decision to do so downgrade before next month’s budget is a clear illustration that it has little faith in the chancellor of the exchequer, George Osborne’s ability to increase growth rates.

Politically, the loss of the AAA rating is a major blow for Osborne, who said frequently its retention was necessary to reduce borrowing costs, curb inflation and keep interest rates down.

Beset by problems on all sides, Osborne faces the danger of higher inflation, particularly in dollar-dominated energy prices – which will exacerbate mounting anger about ever-higher fuel prices for motorists.

Senior Conservatives sought yesterday to row in behind Osborne, who once held near-mythical status with the party’s MPs for his strategic abilities but increasingly faces questions about his political future.

Meanwhile, Liberal Democrats business secretary Vince Cable questioned the rating agencies’s record. “[They] actually have a pretty bad record, they’re a bit like tipsters, they get some things right, a lot of things not right. They are part of the background noise.”

Deficit plans 

He insisted that the British government would continue with its deficit plans – which have so far cut public spending by 3 per cent, though Conservative MPs are likely to increase pressure for accelerated cuts, even though a general election is just two years away.

“I think to embark on a slash-and-burn policy in response to this would be utterly foolish and counterproductive and I’m sure we will not be going there and what I’m concentrating on in my job in government is on the factors that create real, substantial, long-term growth,” said Cable.

Following several years in which sterling’s value against other currencies increased as London was seen as a safe haven, the currency has come under pressure in recent months, losing nearly 7 per cent of its value since September.

Moody’s decision will increase pressure on Osborne to come up with budget measures to boost economic growth. His options are limited, however, as increased borrowing would frighten the markets further.

“I think the thing that will steady the currency markets as far as we’re concerned is a reaffirmation that we are determined to continue on probably another few years of deficit and debt reduction,” said minister without portfolio Kenneth Clarke.

Series of measures 

Saying “you can get nowhere with a burden of debt on your back”, Clarke said the government has taken a series of measures to boost training skills, restore credit for business and invest in infrastructure.

Former Labour chancellor Alistair Darling said Mr Osborne’s original plan to eliminate the deficit by 2015 was “wildly optimistic”, while he is now borrowing £200 billion more than he said he would.

“That’s why people are taking a dim view of us and that’s why I think there are many people who now say: ‘You have to change tack; you have to recognise that a plan to try and slash and burn your way out of this simply will not work’, said Darling.

The Irish Times also reports that the Revenue Commissioners wrote off 20 per cent of unpaid tax from tax defaulters last year on the basis that they could not afford to pay the full amount.

New figures show that of the €70 million owed by tax defaulters up to September of last year, some €43 million was either paid or subject to “phased payment” agreements.

However, the Revenue wrote off €14.5 million on the ground of inability to pay, while a further €12 million was referred for “collection enforcement proceedings” so there is no guarantee it will all be collected.

The total amount of unpaid tax for 2012 is likely to be significantly higher as it does not include settlements for the final quarter of the year.

These are expected to be published shortly.

The amount of unpaid tax written off last year is a significant increase on 2011, when the equivalent for three-quarters of the year was some €6.5 million.

Until recently tax defaulters were able to avoid having their details published if they refused to either agree liability or pay settlements.

This loophole was closed off through legislation enacted two years ago.

Since 2011, the liability of any significant tax defaulter who either fails to agree a settlement or to pay all or part of a settlement is automatically published.

The published figures show a defaulter’s total liability, and do not typically show how much tax has been written off.

‘Rigorous procedures’ 

The Department of Finance has pointed out that before the Revenue accepts a person is unable to pay their full liability, they are subject to “rigorous procedures”, including a detailed examination of their finances.

To put the figures in a wider context, the Revenue has stated that the total yield from its audit programme in the year up to September 2012 was €275 million.

Of this just over €32 million was referred for collection enforcement and €15 million was uncollected on the grounds of the taxpayers’ inability to pay.

One of the most high-profile cases last year related to the construction company owned by Independent TD Mick Wallace, which made a settlement with the Revenue of €2.1 million for undeclared tax.

MJ Wallace Ltd, with an address at Ormond Quay, Dublin, made the settlement arising from a Revenue audit.

The company under-declared €1.4 million of VAT, and Revenue imposed interest and penalty charges of more than €700,000.

Agreed settlement 

The company was not in a position to pay the debt and Mr Wallace told the Dáil last year that he would use half of his TD’s salary – it is around €93,000, plus about €20,000 in allowances – as part of an agreed settlement with the Revenue to pay off the liability.

However, there is little chance of the TD being able to repay all the outstanding tax. Mr Wallace would need to serve as a backbencher for about 87 years to earn enough money so he can pay the money in full.

The changes regarding publication of tax defaulters were introduced to help ensure the public is aware of the identity of anyone with tax liabilities, whether or not they made the relevant payments to the Revenue.

In 2010, for example, there were 305 settlements with Revenue, which totalled almost €68 million.

The following year the number of settlements reached 366. Settlements, along with tax and penalties, totalled more than €75 million.

Up to the end of September 2012, there were a total of 348 settlements.

The overall total was just over €70 million, according to a parliamentary question.

The Irish Examiner reports that the restructuring of the country’s credit union movement could cost more than €2bn; rather than the €500m currently being put aside to cover the cost of change.

According to one consultant, an overhaul of the movement could see the number of individual unions more than halve over the next five years.

Speaking to the Irish Examiner yesterday, David Jackman of global consultancy RGP — which has worked closely with a number of Irish-based credit unions in recent years — estimated that the overhaul of the sector, on the back of the recommendations put forward in the Credit Union Bill 2012, could result in the number of individual unions in Ireland dwindling from about 600 to 150-200 over the next two to five years.

Additionally, Mr Jackman said the proposed €500m restructuring board fund — which forms part of the bill — may not be enough in a worst-case scenario. If the restructuring board fund is used solely to facilitate mergers and alliances between certain credit unions, the €500m may suffice, he said.

However, if it needs to be stretched to bail out underperforming and financially constrained unions, then it won’t be and may need to be boosted by four or five times that amount, he estimated.

Mr Jackman was speaking in the wake of Friday’s comments by EU commissioner, Olli Rehn, that Brussels is closely monitoring Ireland’s credit union sector, for fear of it having a negative impact on the country’s budget deficit over the next few years.

Mr Jackman said such monitoring should be welcomed, as it is “dangerous to rely solely on regulation” to maintain a sector.

However, Mr Jackman added that we are getting a “mixed picture” of the credit union sector, saying that it is not in as bad shape as sometimes claimed.

He doesn’t foresee a “full-scale system collapse” resulting in the need of a multi-billion euro bail out, but still maintains that this is a key and “crunch” year for the sector.

“It is too soon to panic and it wouldn’t be right to do so,” Mr Jackman said. But, he added that the movement must become more proactive and more professional, this year, in order to take a grip on its own destiny.

“This is the year where things will either slide by the sector or when it will start to take control, either individually or collectively,” he added.

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