The Property market has reached the bottom!

The_Conductor

mathie wrote: »

Is it not in the banks best interest to lend?

I don't understand why people say the banks won't lend if it's in their best interest to make money?

Am I missing something?

Yes- they have lost so much money- they are for all intensive purposes not just bankrupt, but also in vast debt, and are being kept artificially alive.

mathie

smccarrick wrote: »

Yes- they have lost so much money- they are for all intensive purposes not just bankrupt, but also in vast debt, and are being kept artificially alive.

And so the way to recover those loses and shake off the debts is to try to make a profit. And the only way they can make a profit is if they lend.

The_Conductor

mathie wrote: »

And so the way to recover those loses and shake off the debts is to try to make a profit. And the only way they can make a profit is if they lend.

They have to sort out their balance sheet mess- before they can contemplate lending. They also cannot make a profit on lending- if it costs them more to borrow the money than they can charge customers. At the moment it costs AIB and BOI 5.8% to borrow on the international markets- whereas they are only charging retail and mortgage customers half this amount....... It doesn't add up.

If you want the banks to make a profit on lending- you have to accept they will bump up interest rates to around about 7% for mortgages and more for other types of lending....... Simple as.

mathie

smccarrick wrote: »

They have to sort out their balance sheet mess- before they can contemplate lending. They also cannot make a profit on lending- if it costs them more to borrow the money than they can charge customers. At the moment it costs AIB and BOI 5.8% to borrow on the international markets- whereas they are only charging retail and mortgage customers half this amount....... It doesn't add up.

If you want the banks to make a profit on lending- you have to accept they will bump up interest rates to around about 7% for mortgages and more for other types of lending....... Simple as.

So do you see any escape route for the banks?

The_Conductor

mathie wrote: »

So do you see any escape route for the banks?

Nationalisation and massive restructuring.
Why do we need 14 seperate lending institutions catering to the retail market in this country? 2 or at a push 3, is more than enough. Push incentives at the IFSC and try to get the excess financial staff mopped up with foreign multinational posts there (and replicate the IFSC elsewhere- on an identical basis).

We are a tiny little country- with the most open economy in the world- we need to accept that we rely on exporting expertise and skills- and not building shoddy apartments in the arse-end of nowhere.

If we really want to cure the ills of the banking sector- we need to nationalise it, take it to bits, and put back the bare minimum to cater to Irish retail banking.

The Irish banking sector is almost akin to our political system- vastly over represented, and vastly under regulated/overseen.

Shovelling assets into NAMA, and a couple of billion at the banks to recapitalise themselves- while it is going to hurt the Irish taxpayer for decades- is simply a sticking plaster that is not going to have longterm impact or effect on the overall health of the Irish banking sector.

dan_d

Very well said!:)

AARRRGH

fontinalis wrote: »

That's what I don't like about it, but still I think alot of people equate high house prices with good times and if the bubble re-inflates I honestly think we won't have learned a thing.

Most people are probably hoping the bubble returns. Certainly most people are waiting for a recovery which means they are waiting for a new bubble.

We are a totally incompetent nation. I find it a bit embarrassing really.

bangersandmash

Referring to the original topic, it's interesting that a number of groups have been going hell-for-leather this week to convince us that we're at the bottom. As usual no critical appraisal whatsoever in the media, just blanket reproduction of press releases.

So we have the IAVI telling us that they saw this coming, so they must be right about the bottom.

“These annual results are in line with our expectations for 2009 and consistent with our belief that the average residential property values would decline 40-50 per cent from peak to trough,” commented IAVI president Aine Myler. “The survey results indicate that the market floor is close, if we have not reached it already.”

Reads a little like their survey from Jan 22nd 2008 when they called the bottom after 10% decreases in Dublin.

IAVA president Robert Ganly was upbeat on the results of the survey. "Overall, I would say to people that the market is beginning to stablise. The worst is over."

The_Conductor

The Economist Intelligence Unit reckon Spain and Ireland have between another 30 and 50% to fall, and at current valuations we are still in a bubble........

Da GOAT

smccarrick wrote: »

The Economist Intelligence Unit reckon Spain and Ireland have between another 30 and 50% to fall, and at current valuations we are still in a bubble........

really, thats interesting. any link to that?

crocro

smccarrick wrote: »

Nationalisation and massive restructuring.

What would nationalisation achieve? We would risk turning the banks into something like the HSE - giant employment schemes providing politcially motivated loans with no regard for efficiency. When nationalised banks seek funding they will be viewed as subsidiaries of the Irish state rather than separate organisations.

Why do we need 14 seperate lending institutions catering to the retail market in this country?

Because competitive industries benefit consumers more than monopolies.

We are a tiny little country- with the most open economy in the world- we need to accept that we rely on exporting expertise and skills- and not building shoddy apartments in the arse-end of nowhere.

Yes, selling each other property is not a substitute for productive work.

If we really want to cure the ills of the banking sector- we need to nationalise it, take it to bits, and put back the bare minimum to cater to Irish retail banking.

and build a new super efficient Bank of HSE.

Shovelling assets into NAMA, and a couple of billion at the banks to recapitalise themselves- while it is going to hurt the Irish taxpayer for decades- is simply a sticking plaster that is not going to have longterm impact or effect on the overall health of the Irish banking sector.

We need to know in the longterm that this is not going to happen again but nationalisation is not a cheap answer. This situation arose through unregulated overlending and moral hazard. So we need to cure those problems.

Irish banks need to become more competitive. There are two main players and two junior players all of whom co-operate too closely for comfort. The clearing companies and the ICB are owned by the banks jointly when they ought to be independent. Consumers can see that banks do not behave like other industries - they are highly unionised and prioritise employees over customers (always a sign of weak management). Terrible opening hours and archaic service offerings are some of the clearest signs of inefficiency and lethargy.

The banks have holes in their balance sheets that can only be filled with future profits or further dilution of shareholder equity from govt bailouts.

The_Conductor

Da GOAT wrote: »

really, thats interesting. any link to that?

Its quoted in this weeks Economist 'Bubble' issue.
I'll dig out the page and reference details at home this evening.

SoupyNorman

AARRRGH wrote: »

Most people are probably hoping the bubble returns. Certainly most people are waiting for a recovery which means they are waiting for a new bubble. We are a totally incompetent nation. I find it a bit embarrassing really.

Desperation is driving the behavior you describe, I'd say you cant count the number of lurkers in negative equity coming here to read what they know deep down but they dont want to believe. The desperation in turn drives the irrational behaviour including the hopefulness that we go into another bubble.


Bottom line, you applied for the money, you took the money, you live in a free market/open economy…JESUS, do you not get it???This line of ‘The bank offered to loan us xxx,xxx,xxx for the 6bed house in Delgany’, ‘it’s the banks fault’, ‘wheres my bailout’ is what embarrasses me.

techdiver

SoupyNorman wrote: »

Desperation is driving the behavior you describe, I'd say you cant count the number of lurkers in negative equity coming here to read what they know deep down but they dont want to believe. The desperation in turn drives the irrational behaviour including the hopefulness that we go into another bubble.


Bottom line, you applied for the money, you took the money, you live in a free market/open economy…JESUS, do you not get it???This line of ‘The bank offered to loan us xxx,xxx,xxx for the 6bed house in Delgany’, ‘it’s the banks fault’, ‘wheres my bailout’ is what embarrasses me.

I 100% agree with this.

Don't get me wrong, the behaviour in the banks and the lack of oversight by our government was criminal, but it just seems we have become a nation of victims, victims that is, of our own crimes.

As stated above no one forced anyone to buy a house or stretch yourself to afford what was clearly un-affordable. As a rule you shouldn't take out a mortgage if it puts you to the pin of your collar, especially when interest rates were so low over the last decade or so.

As a nation we need to man up and the people who got themselves into this situation need to deal with the consequences of their own action and stop blaming everyone else for their ills. The Irish obsession with property ownership needs to be reigned in and the phrases "property ladder" and "rent is dead money", should be banned from use for ever more!

fontinalis

SoupyNorman wrote: »

Desperation is driving the behavior you describe, I'd say you cant count the number of lurkers in negative equity coming here to read what they know deep down but they dont want to believe. The desperation in turn drives the irrational behaviour including the hopefulness that we go into another bubble.


Bottom line, you applied for the money, you took the money, you live in a free market/open economy…JESUS, do you not get it???This line of ‘The bank offered to loan us xxx,xxx,xxx for the 6bed house in Delgany’, ‘it’s the banks fault’, ‘wheres my bailout’ is what embarrasses me.

I also feel bad for them when they get hangovers after the barman made them drink.

SoupyNorman

fontinalis wrote: »

I also feel bad for them when they get hangovers after the barman made them drink.

I worked in a bar for 4years and no one ever blamed me for their hangover, funny that.

mrgaa1

but rent is dead money - we all know that

Barname

smccarrick wrote: »

Yes- they have lost so much money- they are for all intensive purposes not just bankrupt, but also in vast debt, and are being kept artificially alive.

intents and purposes

http://www.wsu.edu/~brians/errors/intensive.html

The_Conductor

Barname wrote: »

intents and purposes

http://www.wsu.edu/~brians/errors/intensive.html

You'll have to report me to the grammar police next
We do actually have a spelling and grammar forum here on boards- think I'd better hang around there a little more...... Spell Czechs, if my memory serves me right.

Barname

smccarrick wrote: »

You'll have to report me to the grammar police next
We do actually have a spelling and grammar forum here on boards- think I'd better hang around there a little more...... Spell Czechs, if my memory serves me right.

I am cruel.

AARRRGH

fontinalis wrote: »

I also feel bad for them when they get hangovers after the barman made them drink.

Nice analogy.

Or getting angry at the publician for having forced them to pay "rip off" prices.

AARRRGH

smccarrick wrote: »

The Economist Intelligence Unit reckon Spain and Ireland have between another 30 and 50% to fall, and at current valuations we are still in a bubble........

I'd well believe it.

I reckon Spain will be worse than Ireland. I remember reading recently that the average price of a home in Barcelona is 600k, yet the average salary is only around 24k.

It's a great city, but come on, that's ****ed.

bangersandmash

AARRRGH wrote: »

I reckon Spain will be worse than Ireland.

In one sense possibly. But we should also remember the large number of Irish people who have invested in the Spanish market - and by extension the Irish banks supported by the Irish tax-payer.

I'd imagine the number of Spanish people who invested in the Irish market is negligible in comparison.

fontinalis

A bit off topic but won't investors in Bulgaria be up a creek also?

The_Conductor

fontinalis wrote: »

A bit off topic but won't investors in Bulgaria be up a creek also?

Yes- however they paid far less than did investors in Spain or Portugal- and there are far fewer of them- though we do have a small number of Bankso investors who post in this forum regularly.

Freddie59

SoupyNorman wrote: »

Bottom line, you applied for the money, you took the money, you live in a free market/open economy…JESUS, do you not get it???This line of ‘The bank offered to loan us xxx,xxx,xxx for the 6bed house in Delgany’, ‘it’s the banks fault’, ‘wheres my bailout’ is what embarrasses me.

Quite simplistic. The bank's reckless lending policies played no part then?

Blackjack

smccarrick wrote: »

Nationalisation and massive restructuring.
Why do we need 14 seperate lending institutions catering to the retail market in this country? 2 or at a push 3, is more than enough. Push incentives at the IFSC and try to get the excess financial staff mopped up with foreign multinational posts there (and replicate the IFSC elsewhere- on an identical basis).

Can you elaborate?. I don't get what you mean here.

Freddie59 wrote: »

Quite simplistic. The bank's reckless lending policies played no part then?

Takes 2 to Tango. Correct, the banks should have been more cautious in their Lending, but the Demand was there, people signed on the dotted line and can't be blaming the Banks for Borrowing beyond their means when they were quite happy to Borrow when the good times were rolling.

daltonr

Blackjack wrote: »

Takes 2 to Tango. Correct, the banks should have been more cautious in their Lending, but the Demand was there, people signed on the dotted line and can't be blaming the Banks for Borrowing beyond their means when they were quite happy to Borrow when the good times were rolling.

Blackjack, I agree with you here up to a point.
Yes, people borrowed and I have fairly limited sympathy for people who borrowed too much, or who lied when applying, or who got loans from credit unions so that they wouldn't show up on ICB reports etc.

BUT

Whatever about who's to blame for the huge number of unpaid mortgages, the Irish Banking system and perhaps even more so the Irish Central Bank and Regulatory system is and has been rotten to it's core for decades.

Ironically, and this tickles me every time I think about it....
The Central Banks as far back as the 70's has basically been willing to put up with ANYTHING, because they considered themselves only to be concerned with the solvency of the banks and the stability of the system.

The DIRT scandal....They Knew....They not only didn't care, they basically laughed at anyone who brought it up as an issue.

Ansbacher. They Knew, They not only didn't care, some of their own relatively high up staff had accounts.

As I say, they only cared about the solvency of the banks. Irony of Ironies.
This Central Bank was so bad, so corrupt, so incredibly incompetent, that even when it cared about nothing but solvency and stability, even when most of it's work was moved to Europe (we don't have our own current anymore)

Even after all of that, the one thing they claimed to be so busy working on...Stability of the Irish Banking System....and look where we are.

On the flip side of that you have the banks themselves.
Up to their necks in Bogus non resident accounts to avoid Dirt.
UP to their ears in scandals and shady dealings that went on for decades.

Yes. The consumers that got themselves into trouble are responsible for their own trouble. But consumers have ZERO responsibility for the collapse of the banking system.

Surely it should be an absolute condition of NAMA that if we are forced to bail out banks because they of systemic importance then one of the most important outcomes of NAMA should be that we have no banks that are too big to fail, and we should have a regulator that actually regulates banks rather than regaling them.

NAMA and everything it stands for suggests to me that the goal is to get back to the same old ways of doing things. Which is why I think in the long run property in Ireland is ultimately going to get a LOT cheaper, because in the long run we're economically doomed to failure.

Everything to this point has been the desperate attempt to cover up the failure.

If you really want a house....See if you can find one that NAMA takes control of. Squat in it. Given the efficiency of official Ireland, your grandkids will be squatting in it before NAMA even knows where it is.

-Rd

Gurgle

daltonr wrote: »

who's to blame for the huge number of unpaid mortgages

What huge number of unpaid mortages?
(Got a linky?)

Theres a huge number of unpaid business loans, where the terms and conditions were ridiculous (e.g. repayments start when development has finished and the houses are sold), or the business has gone into 'take the money and run' liquidation.

Last I heard there were only a few hundred repossessions on the cards for mortgage defaulters, amongst the hundreds of thousands of homes.

-edit- here's a linky

Of 791,634 residential mortgages, there are 17,767 (2.2%) in arrears more than 180 days, and 3,617 (0.045%) for which court proceedings have been issued.

Given that the mortgage lenders typically have a margin of ~1%, defaulted loans are not written off for individuals, and even the most overpriced house has a residual value of at least 50% of peak - The banks still aren't losing money on their residential mortgage business.

daltonr

Gurgle wrote: »

even the most overpriced house has a residual value of at least 50% of peak - The banks still aren't losing money on their residential mortgage business.

Don't know where you get the idea that the worst off houses are still worth at least 50% of peak.
Off the top of my head I know two places that have fallen by more than 50% and still no takerd

Large parts of Dublin are down more than 50%

As for whether mortgage arrears are huge. I guess you're right. It's subjective.

Arrears doubled in a year at a time when many who have lost their jobs would be keeping things going using redundency payments (won't last). Another bunch of people are getting temporary mortgage help from social welfare which will last no more than a year.

Under those circumstances I consider the amount of arrears to be huge.

But if it will make you happy I'll pretend it's all under control.

-Rd