Denial erodes property value, says Swedish estate agent

A VALUER appointed by the Swedish government to determine property values during the country’s banking crisis in the early 1990s says that a period of denial about problems in the market “destroys” the value of properties.

Agneta Jacobsson, managing director of DTZ estate agents in Sweden, said her country endured “a period of denial” between 1990 and 1992 before the full extent of the problems in the property and banking sectors were recognised.

“This period of denial . . . destroys the value of property because nobody cares for the problem,” she said after a business breakfast hosted by Sherry FitzGerald.

“The problem was not yet the banks at this stage. The loans were greater than 100 per cent of the properties’ value and the owners did not feel they owned them – property has to be taken care of.”

She said the state set up a valuation board in 1993 to determine property values in a move to restart activity in the market. The valuation process lasted a year and the market began to grow based on the values set by the board.

Ms Jacobsson said Swedish property values fell by between 40 and 60 per cent during the crisis. She said the Irish Government had made “a good start” with the State’s “bad bank” plan in setting up the National Asset Management Agency (Nama).

“It will take longer here to clean it up but that doesn’t mean that you can’t do good business during this period.”

She said the Swedish bad property loans amounted to a tenth of the €80-€90 billion of Irish loans to be bought by Nama. International expertise and local valuers set prices by assessing properties, including the ability of tenants to pay rents on properties in future.

“It took some time but it started from there – it created a platform and it started slowly,” she said.

She said the Swedish state’s valuation board created “a probable market” based on “best-guess” prices and valuation guidelines.

Swedish banks faced collapse in 1992 after interest rates surged and the Swedish crown fell in value, causing a property crash following a five-year lending boom.

Sweden offered to guarantee all banks and nationalised two, Nordbanken (now Nordea) and Gota.

Two “bad banks”, Securum and Retriva, were created out of Nordbanken and Gota respectively.

The bad banks were expected to operate for 10-15 years but were wound up in 1997 as the market rebounded more quickly than expected. Nama is estimated to have a lifespan of 10-15 years.

The International Monetary Fund estimated last week that the cost of stabilising the Irish banks would total 13.9 per cent of GDP, the equivalent of €24 billion. Supporting Sweden’s banks cost that state 4 per cent of its GDP.

Both the country’s bad banks made a surplus and, with the privatisation of Nordea, the Swedish government has almost recovered its total expenditure on its banks.