PrimeTime RTE1@9.35 - Examining the Property Pyramid Collapse

Dannyboy83

Program tonight should be pretty interesting.
Examining the ongoing collapse in the property market.

Discuss after.


EDIT: For anyone who missed it; its available here http://www.rte.ie/player/#v=1062589

skelliser

pfft! it was lehman brothers........stupid!

dfbemt

Can't wait to find out how much my house is worth, how much negative equity I posess and how I am gonna vote for Fianna Fail again :eek:

Wonder if this will be a balanced report, NOT.

Still, worth watching for Miriam and her glossy lips.

To The North

i was just wondering what was going to be on it tonight, if it'd be worth watching. thanks!

hmmm

More "rent is dead money" merchants interviewed who are desperate to buy into a falling market. You have to wonder.

IronMan

God I better buy now before it is too late! It's the Celtic Tiger 3.0!

Sand

Theres one thing Ireland could do to rationalise the property market:

Reform bankruptcy laws so that borrowers can return the keys to the bank and walk away from the debt.

That would put the risk onto the banks, with their decades of economic and financial expertise to guide them, which would act as a bit of a check on property bubbles given banks would have a real incentive not to lend into a bubble.

Ireland should do this, it would be the biggest economic kick in the pants this country could get. But Ireland wont do this - Fianna Fail have decided all economic development over the next 20 years must be sacrificed to save AIB and BoI bank shareholders and bondholders. Loose bankruptcy laws would force a massive crystallisation in losses for both banks, ending them. BoI and AIB > You.

ei.sdraob

"Rent is dead money"

:eek: :P :rolleyes:

Dannyboy83

Well, Ronan Lyons and the other chap said 50-55% falls from peak, and the expert guy said 60-65% based on 3 methods of evaluation.
65% sounds about right. We've only really seen about 25-30% thus far.

I'm not sure if they actually accounted for all the factors tho,
They took rent values at current rates.
Not post-budget 2010 and post-budget 2011 rates, which given the amount of money leaving the economy and deflation, ought to be substantially lower.
Rent in Northern France for example is about €450 per month for a 3 bed house.

I'm seeing houses in Cork in good areas at 225k, but they're not selling at all. If they were at 175k now, they might start selling.
I would have put a figure of 150k on a 3bed semi-d in a good area by early 2011.
But then you have to factor in the interest rates which will drive values even lower, & once the Mortgage relief runs out in August 2011 (as decided in this budget), things are going to fall even more.
Then factor in the demographics they were working off with regard to emigration and all the buyers who were brought forward during the boom.

At that rate, 65% seems optimistic.
Those values would put NAMA at a fairly horrific loss even with the 30% haircut & not accounting for the fact that most of the NAMA property is probably in remote places like Roscommon, where humans will be scare and jobs a memory.

hinault

Sand wrote: »

Theres one thing Ireland could do to rationalise the property market:

Reform bankruptcy laws so that borrowers can return the keys to the bank and walk away from the debt.

That would put the risk onto the banks, with their decades of economic and financial expertise to guide them, which would act as a bit of a check on property bubbles given banks would have a real incentive not to lend into a bubble.

Ireland should do this, it would be the biggest economic kick in the pants this country could get. But Ireland wont do this - Fianna Fail have decided all economic development over the next 20 years must be sacrificed to save AIB and BoI bank shareholders and bondholders. Loose bankruptcy laws would force a massive crystallisation in losses for both banks, ending them. BoI and AIB > You.

Agreed.
The onus should be transferred from the borrower to the bank : as you say it would prevent property bubbles.

Also we need to adopt the German model whereby more people rent property than own property.

To The North

IronMan wrote: »

God I better buy now before it is too late! It's the Celtic Tiger 3.0!

i don't know how many times people urged myself & the OH to "get on the property ladder" over the last couple of years, despite our insisting we weren't interested in buying a property market that was so inflated. they all thought we were being stupid!

as a country we seem to be obsessed with owning our own houses, it seems to be the be all and end all of our lives. personally i'm not interested in owning a house anytime soon, sure it'd be nice to have my own gaff but i don't want to settle down yet, i want the freedom of being able to go wherever i want, i'll worry about a house in the future.

who_ru

Dannyboy83 wrote: »

Those values would put NAMA at a fairly horrific loss even with the 30% haircut & not accounting for the fact that most of the NAMA property is probably in remote places like Roscommon, where humans will be scare and jobs a memory.

NAMA is dead in the water before it even starts - just look at all the developers looking for examinership in the courts with statements of 'support' from the banks saying they are viable companies!!!

they just want to transfer all the debt to NAMA - it will cost us for generations - people talk about the cuts in the budget!

Dannyboy83

Sand wrote: »

Theres one thing Ireland could do to rationalise the property market:

Reform bankruptcy laws so that borrowers can return the keys to the bank and walk away from the debt.

That would put the risk onto the banks, with their decades of economic and financial expertise to guide them, which would act as a bit of a check on property bubbles given banks would have a real incentive not to lend into a bubble.

Ireland should do this, it would be the biggest economic kick in the pants this country could get. But Ireland wont do this - Fianna Fail have decided all economic development over the next 20 years must be sacrificed to save AIB and BoI bank shareholders and bondholders. Loose bankruptcy laws would force a massive crystallisation in losses for both banks, ending them. BoI and AIB > You.

It goes beyond that tho.
In the program, they were saying there was a couple who offered up €800 worth on their mortgage.
The bank took them to court, took the keys back off them, and they were stuck with the legal costs.
When interest rates start going up -- God knows what we're going see really.

Second colonization of Australia I'd say!

Dannyboy83

Here was the graph from about August 09.
Anybody care to plot what they expect to happen?

Note: You can host the altered image on TinyPic



HERE IS THE UK CHART FOR COMPARISON:

ei.sdraob

Dannyboy83 wrote: »

It goes beyond that tho.
In the program, they were saying there was a couple who offered up €800 worth on their mortgage.
The bank took them to court, took the keys back off them, and they were stuck with the legal costs.
When interest rates start going up -- God knows what we're going see really.

Second colonization of Australia I'd say!

they didnt tell the full story, here is what known about this family:



* they have an autistic child (17)
* the sold a house and had 100K when buying new house
* they scraped another 70K (redundancy?)
* their mortgage was 1900/month
* their mortgage was with a branch of Lehman Bros :eek:
* their mortgage was at high 11%
* they were in their 40s
* they both lost jobs in waterford crystal
* they had to go to subprime lender since local lenders knew they wont have permanent jobs


the judge did they a favor by telling them to get out of this madness

long thread about them here

/

Sand

It goes beyond that tho.
In the program, they were saying there was a couple who offered up €800 worth on their mortgage.
The bank took them to court, took the keys back off them, and they were stuck with the legal costs.
When interest rates start going up -- God knows what we're going see really.

Second colonization of Australia I'd say!

That would depend on if Australia has extradition treaties with Ireland - the banks would pursue anyone who attempted to flee to a new life, surely?

Dannyboy83

Sand wrote: »

That would depend on if Australia has extradition treaties with Ireland - the banks would pursue anyone who attempted to flee to a new life, surely?

Well, if you change your name by deed poll and run away?

Yea sure, they'll screw you if they find you, but will they?
If you stay in the EU then probably, but if you go to Australia, I don't think so.

Dannyboy83

ei.sdraob wrote: »

they didnt tell the full story, here is what known about this family:



* they have an autistic child (17)
* the sold a house and had 100K when buying new house
* they scraped another 70K (redundancy?)
* their mortgage was 1900/month
* their mortgage was with a branch of Lehman Bros :eek:
* their mortgage was at high 11%
* they were in their 40s
* they both lost jobs in waterford crystal
* they had to go to subprime lender since local lenders knew they wont have permanent jobs


the judge did they a favor by telling them to get out of this madness

long thread about them here

/

V.good, thanks, I will read this.

They did say in the program tho that the amount of people in trouble had doubled.
What happens when interest rates start rising, more pay cuts etc.

I think a lot of people will be in serious trouble, the bank are gonna end up with a whole lot of good property on their hands, not the NAMA junk.

ei.sdraob

Dannyboy83 wrote: »

V.good, thanks, I will read this.

They did say in the program tho that the amount of people in trouble had doubled.
What happens when interest rates start rising, more pay cuts etc.

I think a lot of people will be in serious trouble, the bank are gonna end up with a whole lot of good property on their hands, not the NAMA junk.

yes there are some big problems around and on horizon

unable to declare personal bankruptcy is a huge problem, people cant just hand keys back as happens in US

moral of story to anyone -> dont take loans in own name in Ireland, setup a ltd co instead and do it thru that "limited" is the keyword

thats how all them developers are walking away from all their ****, its not in their name (remember Zoe Group?)

ninty9er

When they do eventually drop up to** 65%, I'd hope they stabilise then and fluctuate up and down. Negative equity seems to have been turned into a nasty word by the media, banks and builders, when in reality, if you can afford your mortgage and bought your house to be a home rather than idiotically buying a "step on the property ladder" then it makes no odds, as you are not moving house and have a roof over your head.

Now, on repossessions, wasn't it stated in the Dáil last week that only 31 houses, not homes, houses, have been repossessed by Irish banks this year.

starbelgrade

How does this sit with the UN's Universal Declaration of Human Rights ...

Article 17.

* (1) Everyone has the right to own property alone as well as in association with others.
* (2) No one shall be arbitrarily deprived of his property.

??

KerranJast

starbelgrade wrote: »

How does this sit with the UN's Universal Declaration of Human Rights ...

Article 17.

* (1) Everyone has the right to own property alone as well as in association with others.
* (2) No one shall be arbitrarily deprived of his property.

??

There's a difference between rights and needs.

1. The right to own property does not mean that everyone HAS to have property.
2. If you have a mortgage you don't own the property. The lender does and shall do until you've paid the loan in full. That clause applies to hostile confiscations of private property.

P. Breathnach

KerranJast wrote: »

... If you have a mortgage you don't own the property. The lender does and shall do until you've paid the loan in full...

Just a quibble in the interests of accuracy: you do own the property; your name is on the title deeds. The mortgage means that you have given the lender a legal claim against that ownership which can be asserted if you fail to keep to the terms of the loan.

Atwork

Dannyboy83 wrote: »

Well, Ronan Lyons and the other chap said 50-55% falls from peak, and the expert guy said 60-65% based on 3 methods of evaluation.
65% sounds about right. We've only really seen about 25-30% thus far.

I'm not sure if they actually accounted for all the factors tho,
They took rent values at current rates.
Not post-budget 2010 and post-budget 2011 rates, which given the amount of money leaving the economy and deflation, ought to be substantially lower.
Rent in Northern France for example is about €450 per month for a 3 bed house.

I'm seeing houses in Cork in good areas at 225k, but they're not selling at all. If they were at 175k now, they might start selling.
I would have put a figure of 150k on a 3bed semi-d in a good area by early 2011.
But then you have to factor in the interest rates which will drive values even lower, & once the Mortgage relief runs out in August 2011 (as decided in this budget), things are going to fall even more.
Then factor in the demographics they were working off with regard to emigration and all the buyers who were brought forward during the boom.

At that rate, 65% seems optimistic.
Those values would put NAMA at a fairly horrific loss even with the 30% haircut & not accounting for the fact that most of the NAMA property is probably in remote places like Roscommon, where humans will be scare and jobs a memory.

I might be a little confused here but when you say "mortgage relief runs out in August 2011 as decided in the budget" are you referring to the tax relief that I thought was extended to 2017 to help mortgage holders in negative equity?

jimmycrackcorm

* (1) Everyone has the right to own property alone as well as in association with others.

Provided you can pay for it

* (2) No one shall be arbitrarily deprived of his property.

Provided you keep paying for it until it is paid.

nesf

ei.sdraob wrote: »

"Rent is dead money"

:eek: :P :rolleyes:

What was worse was the determination to get a mortgage on a low salary (25K?) in a company that's facing privitisation/competition in a few years (he worked in An Post).

Dannyboy83

Atwork wrote: »

I might be a little confused here but when you say "mortgage relief runs out in August 2011 as decided in the budget" are you referring to the tax relief that I thought was extended to 2017 to help mortgage holders in negative equity?

Yes, it is extended for current beneficiaries until 2017 assuming they meet the criteria, but for newcomers until 31st June 2011 only.
Newcomers from 1 July 2011 will either not be able to avail of it, or will not be able to avail of the full rate of relief, as it will be transitioned downward and gradually phased out in full by 2017

http://www.budget.gov.ie/Budgets/2010/Summary.aspx#OtherIncomeTax
OTHER INCOME TAX

Mortgage Interest Relief
Qualifying loans taken out before 1 July 2011 will continue to get relief for 7 years. Transitional measures will be provided for qualifying loans taken out between 1 July 2011 and end 2013.

Those whose entitlement to relief would, in the absence of this change, expire in 2010 or after, will continue to qualify for relief at the applicable rate up until end 2017.

Abolition of the relief entirely by end 2017.

Since that means a direct loss in income for those who would otherwise be able to avail of it, it means the actual value of the house will drop by at least the corresponding amount, but realistically should be somewhat more, since it doesn't help consumer confidence during a time of rising interest rates and there is also a full year lost from the expected 7 by 2018.

So assuming it was done to bring forward sales and buy before July 2011, it should actually have the opposite effect for anyone who has their head screwed on straight, giving an incentive to wait until August 2011 and avail of even lower house prices.

Given that the IMF are predicting the recession in Ireland ending sometime in 2011, probably last quarter, it would seem to make far more sense for people to avail of cheap rent and build up deposit, assuming income will continue to fall and tax will continue to rise, and wait to buy at end 2011 or early 2012.

One of my friends who was involved in the industry, says its now a dead industry, he is leaving and seeking to become a prison officer (he wasn't a scumbag tho in fairness).
He said people in office are saying the days of profits are over, even accounting for the expected tsunami of inflation and most of the clients they are seeing now are terrified owners of investment properties who are trying to offload as quickly as possible at prices which are unrealistic, relative to what is to come.
One thing he mentioned which hadn't occurred to me was that, since so many people have been/will be burned, people in future will be far more reluctant to take a chance in such a shakey economy and just continue to rent/emigrate. I guess that's where you bring in the psychology.

Dannyboy83

ninty9er wrote: »

Negative equity seems to have been turned into a nasty word by the media, banks and builders, when in reality, if you can afford your mortgage and bought your house to be a home rather than idiotically buying a "step on the property ladder" then it makes no odds, as you are not moving house and have a roof over your head.

Just to give you my perspective.
I graduated 2005, so only a very small handful of friends managed to purchase.
Now, all of those who wanted to purchase are terrified to do so for fear of losing their job in such a volatile economy. They are quite happy to avail of cheap, and getting cheaper, rent.
And given that they have been forced to rent for so long, they are now quite used to it and happy to do so.
Whereas before, couples rented a house for themselves, now people are starting to share with other couples to cut their rent in half.
Only the reckless people, who have always been reckless, are confident to even spend much on xmas presents.
One of the topics of conversation the other day was who had gone the longest without turning the heating on. I think that is a complete 180 turn from where things were just 2 years ago.

Assuming you maintain conditions similar to when you purchased, I agree, Negative equity is no biggie. The problem is, a large amount of people are losing jobs or their partners are, in which case, if you need to emigrate, you're fairly screwed. And nobody wants to end up like *them*.

Meeja Ireland

starbelgrade wrote: »

How does this sit with the UN's Universal Declaration of Human Rights ...

Article 17.

* (1) Everyone has the right to own property alone as well as in association with others.
* (2) No one shall be arbitrarily deprived of his property.

The UN Declaration doesn't mean property in the narrow sense of houses and land. It means everyone has the right to ownership of things: their shoes, a razor, a crate of beer, etc.

Sleepy

Dannyboy83 wrote: »

Assuming you maintain conditions similar to when you purchased, I agree, Negative equity is no biggie. The problem is, a large amount of people are losing jobs or their partners are, in which case, if you need to emigrate, you're fairly screwed. And nobody wants to end up like *them*.

Another problem comes when a lot of the generation who've bought 1/2 bed apartments at peak prices start needing a bigger place because they're having children. With negative equity they can't move...

Hmm, maybe it's worth investing in a bunk bed company

jmayo

Sand wrote: »

Theres one thing Ireland could do to rationalise the property market:

Reform bankruptcy laws so that borrowers can return the keys to the bank and walk away from the debt.

That would put the risk onto the banks, with their decades of economic and financial expertise to guide them, which would act as a bit of a check on property bubbles given banks would have a real incentive not to lend into a bubble.

Ireland should do this, it would be the biggest economic kick in the pants this country could get. But Ireland wont do this - Fianna Fail have decided all economic development over the next 20 years must be sacrificed to save AIB and BoI bank shareholders and bondholders. Loose bankruptcy laws would force a massive crystallisation in losses for both banks, ending them. BoI and AIB > You.

Great idea :rolleyes:

Lets absolve every eejit who over borrowed, because they had to keep up with the jones down the road and never factored into their equations that they might fall on hard times.
You seem to think that it was all the banks fault, remember it takes two to have a mortgage agreement, the lender and the borrower.

If you allow jingle mail and people to walk away from their debts, then the banks are left carrying the can.
That would be fine if the banks were not linked to us, the ordinary taxpayers of this country.
But we now as good as own them, and we will have affectively nationalised them after next round of recapitalisation.

Thus I don't want the banks in even worse sh**e, becuase Johnny and Mary down the road have handed back the keys and walked after borrowing 500,000 on a 100% mortgage to buy a property that is now worth less than half of that.
What about people who were buy to letters, should they be allowed walk away and leave the sh** for other people.

Why should I (and my kids), and many others who didn't go nuts on the gravy train property ladder, be left carrying the can for the borrowers unresponsible actions and often greed ?
It is enough we are left holding the cr** loans and paying for the incompetence and greed of the bankers, the EAs, the builders.


This type of talk and the talk of personal bailouts for buyers over the last few years is cra**ing down on those citizens of this country who acted responsibly and will thus ensure some people never learn.