cbpa.ie

The State’s new ‘bad bank’ could end up taking control of more than €4bn worth of property bought by Irish investors across Europe at a time when the global economy was shuddering to a halt.

New figures show that €4.3bn was spent investing in shopping centres and office blocks in Germany, Russia, France and eastern Europe in 2007 and 2008 alone, new figures obtained by the Irish Independent reveal.

Investors who financed their splurge with bank borrowings could find themselves holding onto assets worth less than they paid as property values fall.

This means that the National Asset Management Agency (NAMA) will be expected to step in and take over the loans from the main lenders.

Experts last night said the values in most EU countries will not be known until at least next year. However, they do not expect property prices to fall much lower in Ireland and the UK.

This could have serious consequences for taxpayers.

Last week the Irish Independent revealed that NAMA expects to take over €25bn worth of property in the UK, and another €3bn in the US.

Recovery

But NAMA has not said how much property in the EU may have to be taken over as part of the massive recovery operation aimed at saving the financial system and kick-starting the economy.

Figures compiled by international estate agents Jones Lang LaSalle, which operates in 60 countries, shows the extent of the spending spree undertaken by investors in the last three years.

The data shows that Irish investors spent €9.3bn on commercial property around the world in 2007, and another €2.1bn in 2008.

But when the US and UK investments are stripped out, the figures show that €3.7bn was spent on property in 2007, and another €592m in 2008.

The most popular countries for investors were Germany, France, Belgium, the Netherlands and Sweden, where the “worst is yet to come”.

Dr Claire Eriksson, head of research at Jones Lang LaSalle, said the financial strength of the investors would dictate what happened to these properties.

Many were institutions and pension funds but there were private investors involved. Agents CB Richard Ellis (CBRE) said it would take at least six months for values to become apparent.

“The main thing driving this was debt funding and that’s not available now,” Marie Hunt of CBRE said.

“The UK and Ireland are stabilising. This is like a wave going across Europe but most of mainland Europe hasn’t seen the worst yet.

“The worst has yet to come in France, Germany and Belgium, which were all popular with investors, and recovery in central and eastern Europe is going to be even slower. Undoubtedly it’s going to fall.

“The UK was popular because it was like our system, with long leases of 20-25 years and upward rent reviews. Europe is different with five- or six-year leases and rents linked to inflation. There’s further to fall in the European markets and it will take six months to see,” she added.

The ‘bad bank’ is expected to take over up to €90bn worth of toxic loans from the banks over the next year, in the process becoming one of the biggest property owners in the world.

Labour finance spokeswoman Joan Burton last night said it was still unclear if NAMA would take over smaller loans which were extended to the hundreds of thousands of Irish who bought holiday homes.

Up to 60,000 foreign properties are estimated to be owned by Irish investors.

“I suspect it will be much more difficult to value those properties,” she said. “There aren’t a lot of investors to replace those Irish investors so prices will fall.

“There are a lot of people with 20 or 30 properties leveraged against each other. The banks will try to sell the best properties, but will the rest go to NAMA? Will it define what the assets are and what the minimum values are?,” she asked.