Author: Kenneth Duffy

Fiduciam has started 2020 with a substantial increase in new Irish bridging loan business, both north and south of the border, and is bullish about the prospects for rest of the year. 

It aims to lend €50 million in Ireland this year, an increase on its original projection and building on the strength of its Irish bridging loan offering.  Fiduciam will also start offering Irish development loans and be opening a Belfast office.  The company has already hired a new Irish case manager to help with the increase in enquiries. 

Overall, the Irish property market has been improving with property price rises seen in the main centres. This is now spreading to commuter towns and some of the key county towns throughout Ireland. Northern Ireland, which is in a unique economic and political situation, should benefit significantly from Brexit and is likely to continue to perform well over the next couple of years.

Although the main banks in Ireland are still negotiating debt settlements with borrowers, Fiduciam has been proactive in providing exit solutions for many of the thousands of borrowers left in debt following the financial crisis.

Fiduciam began lending in Ireland in early 2017 and to date has loaned a total of €72,244,088 in the Republic and Northern Ireland, across residential property, hotels, farms, care homes and other commercial enterprises.

Kenneth Duffy, country manager for Ireland, says: “From an Irish perspective, the past three years have been incredibly challenging. The country has navigated Brexit and is now dealing with an outbreak of the Coronavirus. Throughout all the economic uncertainty, Fiduciam has remained fully committed to the Irish bridging loan market. Fiduciam’s investment in Ireland continues into 2020, our team is growing, we are introducing Irish development loans as part of our offering, and we are opening a Belfast office.

“Our commitment has paid off thus far, our market share has increased year on year and we fully expect this will continue into 2020, when Coronavirus has run its course”.

There has been much focus on the UK property market and whether house prices are rising or falling and whether this may or may not be due to Brexit.  What we hear less about is what is happening with property prices with our closest neighbour the Republic of Ireland.

Ireland is most often quoted these days purely in relation to the potential backstop. What few papers report on is the current housing crisis in Ireland.  Just a few years ago Ireland had one of the world’s highest rates of home ownership, but this ownership has dropped and both property prices and rents have risen dramatically. In fact, in May of this year, research by Deutsche Bank declared Dublin in the ‘Top 10 most expensive places to rent in the world’.

The shortage of affordable homes is a huge issue, with Ireland’s Department of Housing, Planning and Local Government in August announcing €84m in funding for 25 local authorities providing 1,770 affordable homes nationally. As a long-term solution, this is fine, but how does Ireland deal with this issue in the short term?

It is estimated that 685,000 houses were built in Ireland in Celtic Tiger years, between 1997 and 2007. Where have all these houses gone? Figures by the Department of Finance back in March of this year revealed that €24 billion of loans, including many substantial buy-to-let portfolios have been sold to funds at an average discount of 52%. Many of the sales were completed without the consent of mortgagees. Most of these were non-performing loans and the purchasing fund often wastes no time in foreclosing on the loans. This cycle still continues with Ulster Bank announcing the sale of 4,000 loans worth €900million as recent as July of this year.

How can short term lenders relieve this pressure? The answer is simple, they fill the gap where mainstream lending is simply not available. For example, Fiduciam has provided numerous loans which have allowed borrowers to buy their old portfolios back from the funders. The borrowers can negotiate with the funders directly, safe in the knowledge that they have a reliable funder supporting them through the process. The properties are then brought back on the market and rented out or sold.

Loans such as these have also enabled borrowers to complete outstanding development works on “ghost estates” that have been sitting dormant since the collapse of the housing market. This brings more properties into the market which, in turn, eases the housing crisis in Ireland. Borrowers can then refinance with a mainstream lender when their properties have been modernised and rents have been normalised.

Ireland’s businesses are also crying out for lenders to help them get out of a position where they might lose everything by restructuring their loans. This affords borrowers an opportunity to re-establish their business with a viable exit via mainstream finance, or the sale of the assets on the open market.  Such short to medium term loans provide the perfect ‘pit-stop’ for borrowers.  In essence, providing ‘mid-stream’ lending prior to the subsequent exit with a mainstream lender.

Loans for such purposes are relatively new in the Republic of Ireland, but they can be a positive life saver for borrowers whose loan has been sold and who are consequently at risk of repossession.