is anyone else sick of smug ****s who own houses

giftgrub

now dont get me wrong..one of the days i'd like to own my own place

but at the moment i'm renting..have a nice place guarden great kitchen all mod cons and i'm happy...rent isnt sky high which means i can save some cash

what gets on my wick are the smug ****ers who've just bought their own home....

"youre crazy to be paying rent...why dont you buy a house?"

HELLO???? you dont think i dont know this?

"its acually cheaper to pay for a mortgage than rent"

again HELLO??? just the little issue of the 25 grand needed for a deposit on a 2 bedroom shoebox in crime central

if i sound bitter apologies..im sure someday in the far far future when i eventually own something i too will join the league of smugness

but for now......Will ya ****ing stop

who's with me? who's with me?

Jim

Whats your point exactly?

tonysoprano

No - not with you. You are just bitter. Deal with it! Smug house owner here!

Sir Digby Chicken Caesar

i'm not sure, but he does sound bitter..

Jim

Living with your parents is even cheaper.

Now wheres meh dinnar!

ferdi

giftgrub wrote:

just the little issue of the 25 grand needed for a deposit on a 2 bedroom shoebox in crime central

lol, funny cause its true.

all the investors who buy all the houses, forcing the price up and then rent the houses should be ****ing shot. you know who you are and you will get yours in this life or the next.

FX Meister

Well I've just bought a house and I rent it, should I be shot? And to say it's cheaper to pay a mortgage than to rent is wrong, a mortgage is more than renting these days. I am renting my house right now beccause I can't afford to live in it at the moment. But at least when I can afford it I won't have to buy the house at the current prices. If you can't afford the €25,000 can't you borrow it? That's what a friend of mine has done and that's what a lot of people have done.

ferdi

i am talking about the investors and 'developers' who buy like 50+houses in dublin, they are the problem and they will get theirs

Gurgle

ferdi wrote:

i am talking about the investors and 'developers' who buy like 50+houses in dublin, they are the problem and they will get theirs

They get theirs every month.
They take it to the bank, lodge enough to pay the mortgage & spend the rest on big cars, holidays & stuff.

ferdi

i was thinking more along the lines of a horrible painful death in which they kick and scream, begging to die before they finally gurgle on their own blood and breathe their last.

they are just part on the disgusting greed which has swept over society ever since things got better money wise

aodh_rua

FX Meister wrote:

Well I've just bought a house and I rent it, should I be shot? And to say it's cheaper to pay a mortgage than to rent is wrong, a mortgage is more than renting these days. I am renting my house right now beccause I can't afford to live in it at the moment. But at least when I can afford it I won't have to buy the house at the current prices. If you can't afford the €25,000 can't you borrow it? That's what a friend of mine has done and that's what a lot of people have done.

Technically that's in breach of IFSRA's rules on lending. The bank are supposed to ascertain the origin of the deposit and if it is based on credit they aren't supposed to release the funds. Do they follow this - probably not, but the fact that the money backing a mortgage doesn't exist anyway, if the deposit is also based on credit then it could have disastrous consequences for the economy if prices started to drop.

And in response to the original poster, I just bought a house too, and I used to pay very high rent. I can understand your bitterness but its hardly constructive.

leeroybrown

FX Meister wrote:

If you can't afford the €25,000 can't you borrow it? That's what a friend of mine has done and that's what a lot of people have done.

Unfortunately so. As pointed out in aodh_rua's post it's against IFSRA's rule/. The main problem is that a large percentage of these house deposit loans are (deliberately) taken with the Credit Union, meaning they don't show up on bank credit checks. Now while a banks do make some effort to ensure that customers don't over borrow they obviously won't be factoring this intangible factor in.

giftgrub

sorry if i came across as bitter...just felt like having a bit of a rant on a monday

peace out

ferdi

anyone who hasnt finished paying their mortgage does not own the house imo.

same way anyone who has bought something on higher purchase does not own that item until the last instalment has been paid.

Zulu

I'm with ya Giftgrub - I'm with ya. Keep barking, big-dog!

zt

But think how smug you will be when interest rates go up 2%+ in the next couple of years and the market slows ....

giftgrub wrote:

now dont get me wrong..one of the days i'd like to own my own place

but at the moment i'm renting..have a nice place guarden great kitchen all mod cons and i'm happy...rent isnt sky high which means i can save some cash

what gets on my wick are the smug ****ers who've just bought their own home....

"youre crazy to be paying rent...why dont you buy a house?"

HELLO???? you dont think i dont know this?

"its acually cheaper to pay for a mortgage than rent"

again HELLO??? just the little issue of the 25 grand needed for a deposit on a 2 bedroom shoebox in crime central

if i sound bitter apologies..im sure someday in the far far future when i eventually own something i too will join the league of smugness

but for now......Will ya ****ing stop

who's with me? who's with me?

impr0v

Yer, please do go and borrow the deposit too, then there'll be an even bigger choice in the banks large catalogue of previously owned homes in a few years. Sure you can handle the repayments on a 25k personal loan from the credit union now, but how about when a 2% rise in interest rates adds 200 euro plus to your already high monthly mortgage repayments?

Obviously this doesn't apply to all, but it's a very real scenario in a large amount of cases, and it's bound to bring quite a few houses of cards tumbling down.

Even if things work out ok and the bigger continental economies stay somewhat depressed, leaving interest rates at the record lows they are currently at, there is still something wrong with paying a bank 100 thousand euro for the privilege of borrowing only 2 and a half times that off them for 20 years. We all know how little a quarter of a million buys, in my mind it's certainly not enough to justify the budgeting it would require to manage the repayments with confidence.

Here's the negative view of the future for Joe House-Buyer:

The current capacity in the construction industry and the speed at which they are producing housing units means it's relatively safe to say that they are inevitably going to continue doing so until the market is saturated. The margins are sufficiently high to allow them to continue producing and making a profit at significantly reduced prices, so they can even continue on past this point to a certain extent. Another factor is that the nature of the market at the moment, with the high proportion of buyers being investors rather than owner-occupiers, means that saturation point might have already been reached, but we have no way of knowing (though this is unlikely at this point). There are investors out there with large portfolios, large enough to sustain themselves and remain profitable with a number of vacant properties, or with reduced rental yields, and there is no way of knowing whether or not this is the situation.

Fact: there is going to be a correction in house prices. How severe this correction is depends on numerous factors, the rate of interest rate rises, the amount of the rises, how careful people were when borrowing, how careful the banks were when lending, the supply vs demand situation at that time, general macro-economic factors, etc., etc. To Joe House-Buyer it means that if was unlucky enough to buy just before the correction, and even if it is only a slight correction, he's sitting on negative equity. This means that he owes more on his house than his house is worth. There is nothing more evil about negative equity than this, and as long as Joe is prepared to put up with paying those bigger (with the interest rates rises) mortgage repayments and the loan repayments on his deposit loan for the next year and half just to get his loans down to the real value of his house, nothing else happens. Though obviously this scenario is pretty soul destroying for him.

Then of course, there is the possibility of another correction coming, or further interest rate rises, increasing the amount of negative equity he's sitting on, which he has to consider. Perhaps when the (initial) correction happens he'll cut his losses and sell up at the reduced market price, just in case things get worse. Perhaps his out-going are already too high thanks to the increases, and he has to default on the loan. Bank of Lunacy shrug their shoulders and repossess the house. Either way, the house goes back on the market, and who buys a house in a falling market? Suddenly the mortgages are being issued much more cautiously, and everyone is waiting for the best price they can get. So the bank, or Joe, lower the asking price, and the market is depressed further, increasing the burden on those who have not decided to cut their losses, or who are still able to make the repayments, and more fall to the inevitable. Joe might get his house sold, or have had it repossessed, but he now has to enter the rental market, and also still has the personal loan from the credit union which he got to pay the deposit hanging over his head.

Meanwhile, a few other people find themselves in Joe's position, now that the correction in prices is slightly larger, say they're down by 20k across the board, which is still a relatively small amount. Those that are still ok are getting nervous, assessing their options. The bank repossesses a few more houses. Some cases where people exaggerated their income slightly, or people who have lost their jobs in construction or the spin off industries, and some who had dabbled in investment, bought two places with different institutions and are now stretched. The Bank of Lunacy is now slightly worried and owns up to the fact that their lending portfolio is not sufficiently diverse to remain unaffected by further market problem, and is predominantly mortgage orientated. They correct this in the short term and unstable market conditions by making it next to impossible to get a mortgage and all those houses looking to be sold quickly are left sitting, worsening the situation.

It's at this point that things start looking to change from being a correction to a crash. If people keep calm, and depending on how the media play it, it could blow over. One thing is certain, interest rates will be unaffected by situation. They'll keep rising if the main continental economies need to be cooled for whatever reason, whatever happens in Ireland is not really of huge concern to the ECB. It's unlikely that the media will yell 'CRASH' too soon, as they have such vested interests in the current system, their biggest advertising revenues, among the papers at least, for the past three to four years have come from estate agents and auctioneers.

Crash or correction, the smug certainly won't be as smug, and will not be seen in Xtravision blowing money on discretionary purchases for a few months, putting up with TnG and RTE two for a while instead.

As stated, that's the negative view, but it's certainly not fantastic, it could easily happen.

Then again, prices could gradually level out, but stay in or around their current levels, plus some more, and everyone pays their mortgage and deposit loan back and live happily ever after.

giftgrub

wow...thats a post and a half...any idea when this flip in the market is going to happen?

FX Meister

aodh_rua wrote:

Technically that's in breach of IFSRA's rules on lending.

It may breach the rules but if a person is prepared to take that risk then what matter does it make. If it means someone can buy a house instead or renting one then I have no problem with it.

Raskolnikov

giftgrub wrote:

wow...thats a post and a half...any idea when this flip in the market is going to happen?

It flipped yesterday, then again today.

impr0v

/me consults crystal ball.

In a word no. It's very closely related to the interest rates, so watch for them to turn. The next critical factor is supply and demand which is very hard to second guess. In terms of supply this will be the third year in a row that the country has built a record amount of houses. The construction industry itself reckons that this year is the peak in the amount being built, but they intend to maintain current production levels, give or take a small amount, for a few years. Demand is much harder to quantify. People are still buying, though many are investors, and a large percentage seem to be people liquidating the money tied up in homes which they own and moving to another location, keeping the difference in what they got for, say their 4 Bed in Ranelagh, and what they paid for the 5 bed in Lucan, and using it to fund a higher quality of life.

Also, I still know a lot of people in their mid twenties without a house, and who will inevitably need somewhere eventually.

Perhaps we'll all grow out of the Irish need to possess our own little piece of landholding and rent for life (i know the argument about then having no collateral).

giftgrub

It flipped yesterday, then again today.

is that what that noise was?

zt

Improv

Good post. I wanted to rant as well but you saved me a job.

Interest rates are linked to europe. This means that we are tied to inflation to the big EU countries. I guess that 1% in the next 12 months is absolutely certain; maybe the first .25% this month?

Lots of investors are in a strange position whereby they own multiple properties with very little disposable cash. Imagine in a turning market owning 10 properties and having 2 empty with the other 5 bringing in less than expected rents. The only solution is selling at discounted price.

One final point; has anybody noticed the increased numbers of for sale signs in the D4 area over the last 18 months .... This is a good indication that the market has hit a peak.

pork99

ferdi wrote:

i am talking about the investors and 'developers' who buy like 50+houses in dublin, they are the problem and they will get theirs

You can console yourself with the thought of how much money they'll loose when the bubble bursts and the market crashes as is inevitable.

Flukey

Most people don't really own their houses as such. In effect it is the bank that bought it. We also hear this thing about people being able to afford to buy a house and then getting a mortgage. If you could afford to buy a house, you would not need a mortgage. The only reason you get a mortgage is because you don't have enough money to buy a house yourself or in other words you can't afford to buy a house. So most people that say they own their own house or can afford to buy the house are actually lying.

ionapaul

I have a different problem to other people - I can easily afford the deposit without borrowing a penny (if I may say so I am very good at saving and live very far below my means), but since I am single (and just couldn't start a relationship JUST to be able to buy a house, like lots of other people) and earning just above the average industrial salary, I cannot come close to borrowing the rest! Nor would I want to right now, I couldn't live with myself spending 10 x annual salary for a house. I've already decided to emigrate within two years if there is not a crash, not a correction - need them to go down by over 20% to stay. I'm not overly keen on Ireland at the best of times, so that's no biggie, I can have a much higher standard of living elsewhere by paying less on a mortgage.
As a betting man, I have to say that I truly believe that prices will be lower 12 months from now. But I can't see a big crash, just a small correction.

ando

Jimeatsmenu wrote:

Living with your parents is even cheaper.

Now wheres meh dinnar!

ditto and where's my clean clothes while your at it. The rest of my siblings didnt leave till they were 26 so I aint budging till then, unless ofcourse I get sucked in by a persuasive, overbearing women determined to settle down which in todays climate isnt too difficult :rolleyes:

X-Dawg

giftgrub wrote:

now dont get me wrong..one of the days i'd like to own my own place

but at the moment i'm renting..have a nice place guarden great kitchen all mod cons and i'm happy...rent isnt sky high which means i can save some cash

what gets on my wick are the smug ****ers who've just bought their own home....

"youre crazy to be paying rent...why dont you buy a house?"

HELLO???? you dont think i dont know this?

"its acually cheaper to pay for a mortgage than rent"

again HELLO??? just the little issue of the 25 grand needed for a deposit on a 2 bedroom shoebox in crime central

if i sound bitter apologies..im sure someday in the far far future when i eventually own something i too will join the league of smugness

but for now......Will ya ****ing stop

who's with me? who's with me?

I bought a house last month (which I worked my ass off for,literally, i was a rent boy), but yes - I agree. For years I had d*ckheads saying "You're mad to pay rent, etc". F*ck off - like I had a choice.

Gurgle

My 2c (change wanted):
- Negative equity, not going to happen at current prices, except possibly in certain sections of the market that are already massively over-priced. e.g A 1-bed flat for €300k in the city centre would not hold its value through an economic slump.
- The bank doesn't own your house. You own your house, you owe the bank money. Your mortgage is an agreement that if you fail to pay the bank, it can (as a last resort) seize your house.
- If interest rates go up & ppl can't pay, they will let rooms out. If they still can't pay, they can re-mortgage over a longer period. If they still can't pay, they can sell the house & buy something cheaper. There is not going to be a sudden rush of banks seizing houses.
- If the bottom did drop out of the market, the last thing the bank will want to do is seize a house thats worth less than whats owed on it. Better to 'help' the customer out until the market recovers & there is some equity in it.

seamus

Gurgle wrote:

- If the bottom did drop out of the market, the last thing the bank will want to do is seize a house thats worth less than whats owed on it. Better to 'help' the customer out until the market recovers & there is some equity in it.

I'm far from a financial type guy, but that just seems like common sense to me. I'd be interested to see what a collapsed market would generate. On one hand, you'd have a rush of people like me who haven't got their own home, seizing on the newly cheap property, as well as investors who may have played their cards right leading up to it.
On the other, you'll have a *lot* of people who will hold onto their property, unable to afford to sell it (they'd come out with a loss).

It would be interesting to see how it developed, but it would be devestating to our economic situation. We already have a very high rate of lending, with mortgages making the bulk of it. If people's properties were to suddenly devalue, our lending rate would shoot up.

MickFarr

Is there anybody who is actually waiting for a property crash to buy a house ? All I see are house prices rising.

muffen

I bought a house 2 years ago for 185K.

Sell is scheduled to close in 2 weeks time for 215K.
I took the money and moved to Sweden, now I have an apartment in Stockholm city center

pickarooney

muffen wrote:

I bought a house 2 years ago for 185K.

Sell is scheduled to close in 2 weeks time for 215K.
I took the money and moved to Sweden, now I have an apartment in Stockholm city center

Is that actually much of a profit, taking into account interest, legal fees etc?
I am absolutely clueless about property etc. and the thought of buying a house terrifies me. Just the paperwork makes me want to scream like a little girl and run home to my 3-bedroom rented house @ €300/month (that's as smug as I can afford to be )

PH01

Another level to the smugness of home ownership is to mention 'when' you bought your house. Like "I bought my semi-d in 2000 for IR£175,000" - "That's nothing. I bought mine for IR£70,000 in 1996"... and so on.

However, I really don't know how people are able to afford houses these days? It only seems affordable if yourself and your husband/wife/partner are both in well paid jobs. God help you if you have kids, or if you have to commute long distances, then it's really hard. If this is you, you're the new working class - you need to work to survive.

ToxicPaddy

muffen wrote:

I bought a house 2 years ago for 185K.

Sell is scheduled to close in 2 weeks time for 215K.
I took the money and moved to Sweden, now I have an apartment in Stockholm city center

Hmmm now there is an idea..
Surrounded by swedish blondes.. thats a wise investment if I ever heard
one..

Outta curiosity. mind if I ask how much the apartments in Sweden are???

Tox

Bard

ferdi wrote:

lol, funny cause its true.

all the investors who buy all the houses, forcing the price up and then rent the houses should be ****ing shot. you know who you are and you will get yours in this life or the next.

Yeah, its because of one of those feckers that myself and my girlfriend are still searching for a house rather than living now in a perfect little place.

We were house-hunting in Dundalk recently. Found a perfect one - lovely location, facing onto the green in an estate far away from the council estates and close to the town and the bypass - near to work for both of us - lovely house too with a nice garden - brilliant wooden flooring in the living room and stone effect flooring in the kitchen. Nice bedrooms upstairs with spacious storage, etc. etc. etc. - and so we put a bid in. Unfortunately we were bidding against one of those investor bolloxes who was only planning to rent it out and he outbid us eventually.

Still .. we got some small comfort out of the fact that bidding against us cost him 4 grand...

spongebob

PH01 wrote:

God help you if you have kids, or if you have to commute long distances, then it's really hard.

Anecdotally I hear that this tendency has peaked. Those who bought in Mullingar are now moving inexorably towards Dublin. It may be only as far as Enfield or Ratoath but the outer commuter belt seems to have peaked.

M

muffen

ToxicPaddy wrote:

Hmmm now there is an idea..
Surrounded by swedish blondes.. thats a wise investment if I ever heard
one..

Outta curiosity. mind if I ask how much the apartments in Sweden are???

Tox

Depends on where you choose to live (very much more so than in Ireland).
My apartment is a one bedroom apartment (52 square meters), but it's in a very very nice location. To compare it to Dublin, you could say that I live around Trinity (I'm close to the main pubarea, and 3 stops with the tube from the main shopping area).

I paid just less than 200K euros for it.

Thing is though, center of stockholm is a bunch of small islands, and if you live outside them, the price is less than half.
So, if you live say, 15min tuberide from the center, an apartment same size as mine would be around 80K - 100K.
20min tuberide from the center and you are down below 60K for the same size apartment.

muffen

pickarooney wrote:

Is that actually much of a profit, taking into account interest, legal fees etc?
I am absolutely clueless about property etc. and the thought of buying a house terrifies me. Just the paperwork makes me want to scream like a little girl and run home to my 3-bedroom rented house @ €300/month (that's as smug as I can afford to be )

I counted on it, and that profit makes it so that I lived completly free for two years (it paid for my interest, phone, internet, electricity etc), and that's after removing the solicitor fee's.
So, how much is two years rent worth ... that's my profit (in my opinion, not a profit to be ashamed of)

giftgrub

what i dont get is all this talk about the price of property...eg i bought my house for 150 k now its worth 200 k...without being smart to any of the homeowners here...that doesnt mean a whole lot to me

say your house is worth 200k youre not going to make a profit on a sale unless you move somewhere smaller or cheaper

and if you do trade up...get a bigger mortage...relatively speaking, in terms of how much money you have in your pocket at the end of the month to spend on sweets and crisps, i dont think you're any better off really....

but hey, i could be wrong...


dont hate me homeowners!!!

PH01

A long long long time ago when I was in college, I wrote a paper on these very aspects discussed here in this thread. It was the early 1990's and my paper focused on the affordability of houses in Dublin between 1985 and 1992. At the time we saw a huge collapse in the house price in Britain - negative equity like you wouldn't believe. So I wanted to find out if the same thing was possible here in the good old republic.
Around this time house prices doubled - house which were going for IR£27,000 in 1986 were then fetching close to IR£50,000 by 1992. Some were worried that the house price might collapse, or that people would be unable to repay their mortgage. Interest rates were at 17% at one stage.
However, there was no collapse in the house price and there were almost zero repossessions in that time. The market here didn't reflect what was going on in the UK (if it ever did or will do).
One of the main reasons why house prices held up was down to the purchasers themselves. Much like today, if you wanted to buy a house then you had to beg and borrow from what ever outlet came to hand. It was usually the parents who put up the extra dough. And yes this is still the case.
Also, the banks were very reluctant to repossess house due to someone defaulting on the mortgage. It was bad for business. As well as getting bad press, Judges were unlikely to grant a repossession orders, which wasn't the case in the UK were they were handing them out like Smarties.

But how about now?
Well Impr0v wrote a very good piece earlier in the thread. The market is distorted by the presence of investors, and a levelling out of prices is probably going to happen. Though with prices increasing by 7% pa, it is still a big increase.
Like I said before, I don't know how people can afford to get on to the first run of the property ladder. If two people on well paid jobs can't afford to buy their own home with interest rates this low and the economy booming, there must be something seriously wrong. Should these people be angry? Damn right they should. We should all be angry about it? Sure we should - it's a bit like killing the goose and the golden egg thing.
In the early '90's we had high unemployment, and high interest rates. Then if you had a job you could buy a house. It is, and it still is one of the main reasons why we live and work on this island. We like to own our own home. If you can't do it here you're going to go somewhere else like Sweden.
Do we want to see young Irish people leaving because they can't afford to live here because they can't buy their own home and not because they can't find work?

spongebob

Some Very Sound Stats on This Website here , Irish Property Crash , I personally support the premise that the market in Ireland will be killed by oversupply more than the Interest Rates as Improv thinks. Prices in Ireland are ridiculous, there is no other word to describe them.

M

seamus

giftgrub wrote:

what i dont get is all this talk about the price of property...eg i bought my house for 150 k now its worth 200 k...without being smart to any of the homeowners here...that doesnt mean a whole lot to me

say your house is worth 200k youre not going to make a profit on a sale unless you move somewhere smaller or cheaper

and if you do trade up...get a bigger mortage...relatively speaking, in terms of how much money you have in your pocket at the end of the month to spend on sweets and crisps, i dont think you're any better off really....

It's about assets. If your house has risen by €50k, then that's €50k you're better off (in theory - take away the amount you've paid in interest back to the bank, and that's your actual profit). If you sell up, that's €50k more you can sink back into another house, on top of the deposit and outlay you originally put on the house.

That is, taking a simple example.

You buy a house for €150k.
€50k of that is yours, 100K is the bank's, and you're paying them back €500 per month, €100 of which is interest (yes, simple example).

You sell the house 2 years later for €200k. So, after two years, you've paid the bank €12K, of which €2400 was interest. So €9600 was paid off against the loan.Therefore you owe the bank €90,400. You sell your house, give the bank their money, and you're left with €109,600 to spend on another house, or whatever you want.

Net profit to you: €47,600. Even if that goes into another house, it's still profit. It's still a tangible asset.

Again, very simple, not taking many other charges and things into account, but you get the idea.

impr0v

Gurgle wrote:

My 2c (change wanted):
- Negative equity, not going to happen at current prices, except possibly in certain sections of the market that are already massively over-priced. e.g A 1-bed flat for €300k in the city centre would not hold its value through an economic slump.

You may well be right about this. However, personally I think there is a fine line between the price levels now, and the 'over-priced' tag. I know the example you provided of the one bed in the city centre for astronomical money was the clearest example, but I think that there are very many locations where a wider case could be made for bad value for money. Take the example of the development in suburb X, a suburb not generally known of for its desirability. However, the houses/apartments in this development cost a fortune, because suburb X is relatively close to the city centre, so the prices on their own generate a certain amount of asset pride or whatever you want to call it. When a correction comes, developments such as these will be among the first to suffer, purely because of location, and could lose value at a higher rate that an almost identical development in a neighboring suburb with a more 'desirable' address.

Also, In reality there are a large amount of developments, not only in the city but around the country, which are being built to less than lofty standards. Corners are being cut in the quality of materials, the quality of the workmanship and in the construction of the units in general basically due to the greed of the builders, and also perhaps an inability to get good tradesmen in the current climate. Now you can get an experienced surveyor in to snag the house, (which most people don't do preferring to get a mate who has some experience in the field) and he'll be able to spot the obvious stuff and you can then take this list to the builder, who'll make the necessary cosmetic changes. However, a lot of deficiencies are, by their nature, hidden from view, and will not come to light until say 10 years down the road, when cracks appear in the masonry and damp is a serious problem. Properties such as this will also be relatively quick to lose value, provided the problems come to light. In a cautious market, there is also the possibility that other developments built by the same firm will suffer.

Gurgle wrote:

- If interest rates go up & ppl can't pay, they will let rooms out. If they still can't pay, they can re-mortgage over a longer period. If they still can't pay, they can sell the house & buy something cheaper. There is not going to be a sudden rush of banks seizing houses.

This makes sense in the current situation. However, say the rates go up in four years. The rental market is already much slower than it was two years ago, the same money will get you a much nicer rental property now than it would in '02, because of the amount of properties on the market and the migration of individuals out of the rental market and onto the property ladder themselves. In three or four years, this situation is likely to have progressed further along these lines and the market having turned almost full circle from a landlords market to a lessees market. This is obviously location dependent. If you have your house at the Clonskeagh gate into Belfield, you are going to be able to depend on the rental income in all but the most extreme of scenarios, likewise a property very close to the city centre. Elsewhere things aren't so clear cut. If you go to rent a room or two in the house with yourself and your partner, why would someone rent it when they can get a one bed apartment relatively cheaply, with the added benefit of privacy. The point I'm making is that it cannot always be assumed that rental income is there to be had when the home-owner decides they need it.

Re-mortgaging is again, an option currently. But how willing are the banks going to be to entertain this on a large scale, in a falling market? In my original post I went over the scenario of a lot of houses coming on the market at the same time, in response to raised interest rates, at a time when mortgages cost more and the banks are less willing to provide them.

Once again, it's worth emphasizing that I'm definitely painting the negative side of things here, it's possible that none of this will happen, but at the same time, it's not exactly pie in the sky.

Gurgle wrote:

- If the bottom did drop out of the market, the last thing the bank will want to do is seize a house that's worth less than whats owed on it. Better to 'help' the customer out until the market recovers & there is some equity in it.

I do agree with you that there won't be a rush of houses being repossessed, unless things take a sudden and large turn for the worse. Though again, it's hard to predict how the banks will react when they are faced with having to 'help' a large amount of mortgages accounts at the same time. A few institutions are currently, because of their philanthropic nature, not charging interest on mortgage arrears. Only the naive will think that the financial institution are going to be this understanding over the long term.

The bigger picture in terms of the banks is not a pretty one. They have been deliberately bending their own rules in terms to lending so as not to be left behind by the other institutions who have been doing the same. After all, it's worth taking the odd risk or two if they stand to make 100 thousand on a 250 thousand mortgage over 20 years at current standard variable rates. 5k per year is a nice return (although inflation and other factors would have to be taken into account in a strict financial analysis of the return). Have they over-extended themselves? There are professional analysts who would have difficulty answering this, but again, it's not wild sensationalism to suggest that they might have. Perhaps you might have noticed that if you go to get a personal loan from one of the major institutions at the moment, they will approve it with the minimum of fuss. This is in response to a number of warning from the IFSRA and other about the bias of their lending towards mortgages, leaving them exposed if the market does get nervous. Of course, if they are lending these personal loans to customers who have already availed of a mortgage from them, then these repayments are essentially tied into the housing market also.

The vagaries of this little closed island market come in to play here too. Say the Bank of Lunacy lend you 220k for a mortgage, you have this money, or the bulk of it for three weeks or so, until you pay the builder or agent for the house. Then the chances of the money coming back into the same Bank's system is just less than one in four, if it is one of the big two, whom you can all name. AIB recently brought about 20 of the country's biggest names in residential developments on an all expenses paid trip to the Ryder Cup in Michigan USA. The developers didn't have to put their hands in their pockets once during the whole trip. It was a pitch to try and encourage the developers to have their accounts with AIB. Because of the quick return of lent cash, the banks don't have to be overly cautious about cash flow issues, though of course there are much more detailed consideration to giving a loan than these.

The lending figures themselves are spectacular. In 2003, the five Irish clearing banks, BOI, AIB, Ulster, Permanent TSB and NIB made loans totaling 164 billion euro, BOI lending 67.5 billion of this on its own. Their write off of bad debts (the five combined) was just over 320 million, only 0.2% of lending as a whole, and they are more than willing to absorb this, BOI alone having set aside 440 million on their budget to cover potential bad debts. If and when this figures starts to rise however, the nice caring bank might be a different animal to deal with.

Gurgle

seamus wrote:

after two years, you've paid the bank €12K, of which €2400 was interest. So €9600 was paid off against the loan.Therefore you owe the bank €90,400. You sell your house, give the bank their money, and you're left with €109,600 to spend on another house, or whatever you want.

Net profit to you: €47,600. Even if that goes into another house, it's still profit. It's still a tangible asset.

Of course you weren't paying rent for the two years and you get tax relief on the interest.

zt

Interesting comments from AIB.

FROM RTE Business News

An AIB report on the housing market has predicted that house price growth will slow to between 3% and 5% next year.

AIB Global Treasury said that while house price inflation was still high, the trend was downwards, and growth should be down to just 10% by the end of the year.

The report concluded that there could be a 'soft landing' for the housing market, and it was optimistic a crash could be avoided, but it warned that there were still risks.

AIB cited the record level of house completions - 80,000 this year and a similar figure next year - saying supply at these levels 'cannot be absorbed indefinitely'. But the report said the building industry would respond to easing demand by slowing activity.

AIB said it would take one or two other factors - a deterioration in the labour market or a sharp rise in interest rates - to cause a housing market crash, adding that neither seemed likely in the short term.

The report also warned that lower rents and higher prices meant there was a risk of a 'significant withdrawal' of interest from investors, though there was little evidence of this yet.