Glut of repossessed houses could depress prices ‘by up to 25%’

gaius c

Even unemployed people pay top ups (even though they shouldn't).
If you're paying zero, you are a strategic defaulter. Simple as.

cookie1977

gaius c wrote: »

Even unemployed people pay top ups (even though they shouldn't).
If you're paying zero, you are a strategic defaulter. Simple as.

I think that's too simple a view to be honest. I dont think it's simple to categorise all those paying zero as strategic in some way no more then I think that all those who are in arrears have no one else but themselves to blame. The problems go a lot deeper then that. There are multiple reasons/causes for being in arrears. As I've said before I dont think the government nor the banks are doing enough to deal with the problems. It's more a keep our fingers crossed and hopefully it'll sort itself out. It wont, and it'll come to a head at some point in the future.

zl1whqvjs75cdy

It always amazes me when people berate others for being sensible at the height of the property boom. Saying things like "O weren't you so lucky to not have bought a house that was 10 x your salary" and then going on to claim that these sensible folk should just go away and stop calling for repossessions.

It may come as a surprise to the reckless, feckless spenders but we weren't all as stupid about house buying, we did manage to keep feet firmly on the ground, not through luck or whatever you want to call it but through actual thought and financial planning. Earning 35K a year? I think I'll pass on the 500 k mortgage thanks, it doesn't exactly take a degree in economics. And yes these people may sound smug now, but how smug were families all over Ireland after moving into ridiculous 6 bedroom houses which they hadn't a hope in hell of ever paying off.

The stall on repossessions is merely prolonging the pain, it has to happen to re adjust the market. People banging on about us footing the bill for repossessions can also do one. If the banks continue to hold onto non preforming mortgages what do you think is going to happen? That they'll turn record profits and skip away into the sunset? Not a chance. The under preforming loans have to be eliminated and eliminated quickly, and if repossession is the only way to eliminate them, so be it. The longer it is left the worse it gets.

khards

Re: Price rises.

The only reason that prices rose before was credit expansion and the ability of people to use borrowed money to bid up property prices.

People ramping prices either zero understanding of economics otherwise they would realize that credit needs to expand for prices to rise.

No credit expansion = No prices rises.
Credit expansion = Price rises

[Edit] supply and Demand have almost Fall to do with the prices of property. 99% of it is ability to pay and outbid.

riclad

IF someone is paying interest only on a mortage,
loan is 200k,
house is worth 100k,
Does it make sense to evict them,sell the house for 100k.
Prices from 2001 to 2008 ,were bubble prices ,
Caused by the banks reckless crazy lending .
it costs the bank money to go to court ,sell a house ,pay estate agent .
I Don,t think ulster bank had enough mortgages ,market share , to change house prices in most area,s .
Anglo ,irbc still owns propertys,in my countrys , and is still there to collect money off debtors ,and take people to court.
IN certain cases the banks could write off x per cent of mortgages and
it would make economic sense to do so.

IT was on joe duffy show today.
Some banks are selling houses for auction,at low prices,
for less than the mortgage holder offered to pay.
eg holder offers 70k,
house is sold at auction for 60k.

zl1whqvjs75cdy

riclad wrote: »

IF someone is paying interest only on a mortage,
loan is 200k,
house is worth 100k,
Does it make sense to evict them,sell the house for 100k.
Prices from 2001 to 2008 ,were bubble prices ,
Caused by the banks reckless crazy lending .
it costs the bank money to go to court ,sell a house ,pay estate agent .
I Don,t think ulster bank had enough mortgages ,market share , to change house prices in most area,s .
Anglo ,irbc still owns propertys,in my countrys , and is still there to collect money off debtors ,and take people to court.
IN certain cases the banks could write off x per cent of mortgages and
it would make economic sense to do so.

IT was on joe duffy show today.
Some banks are selling houses for auction,at low prices,
for less than the mortgage holder offered to pay.
eg holder offers 70k,
house is sold at auction for 60k.

So what's the alternative? The house will probably never be worth 200 k again so do the bank just sit tight and continue to loose money? Or cut their losses now?

riclad

HOUSE IS now worth 100k,
if the mortgage holder can only afford to pay interest,
let them stay there,
They are paying the same payment as joe bloggs with a 100k mortgage.

MAYBE in 5 years time the economy will improve.
And the government will stop bringing in new taxes every few months.

OR MAYBE the bank could just write off 50k,
say,
we,ll treat the loan as a 150k mortgage from next month.
Most banks are owned by the government ,
ie you ,the irish citizen.
What is best for the country ?, not just one bank.
i think people who bought investments propertys,in arrears.
Well if the banks want to repossess , let them.

THE BANKS made many bad crazy stupid loans .
they should take part of the loss,
instead of putting it all on the mortgage holder.
Who do you think is gonna pay for rent allowance for the people evicted ,
?

OR THE bank could say we,ll ignore x per cent of the loan amount for the next 7 years.
Put it on the shelf.

Tigger

if i owe the bank 200 apples and i'm not giving it any apples cos i don't have any
and they right down my debt so i only owe 70 apples and i still dont pay then they are no better off

if however piglet gives the bank 60 apples there and then then they are better off to the sum of 60 apples

selling off at acution is better than re-negotiating for the banks

Snakeblood

riclad wrote: »

HOUSE IS now worth 100k,
if the mortgage holder can only afford to pay interest,
let them stay there,
They are paying the same payment as joe bloggs with a 100k mortgage.

MAYBE in 5 years time the economy will improve.
And the government will stop bringing in new taxes every few months.

OR MAYBE the bank could just write off 50k,
say,
we,ll treat the loan as a 150k mortgage from next month.
Most banks are owned by the government ,
ie you ,the irish citizen.
What is best for the country ?, not just one bank.
i think people who bought investments propertys,in arrears.
Well if the banks want to repossess , let them.

THE BANKS made many bad crazy stupid loans .
they should take part of the loss,
instead of putting it all on the mortgage holder.
Who do you think is gonna pay for rent allowance for the people evicted ,
?

OR THE bank could say we,ll ignore x per cent of the loan amount for the next 7 years.
Put it on the shelf.

I'd rather pay rent allowance for people evicted than buy them a house, which is what writing off debt amounts to. I don't want to pay for someone to buy a house they'll own, when I can't afford to buy one. It's asinine to pretend that's a good idea. People who can't pay their mortgages are looking out for their interests, but asking anyone who can't buy a house because defaulters are in them is stupid.

What advantage do renters get from paying for people to write off their debts and live in houses they can't pay for? What disadvantage?

stevedublin

Chris Shy Moped wrote: »

So what's the alternative? The house will probably never be worth 200 k again so do the bank just sit tight and continue to loose money? Or cut their losses now?

You are assuming house prices will go down, but they are already starting to rise in some areas.

Cuddlesworth

riclad wrote: »

IT was on joe duffy show today.

Because the Joe Duffy show is the bastion of reasonable and non-biased debate.

khards wrote: »

Re: Price rises.

The only reason that prices rose before was credit expansion and the ability of people to use borrowed money to bid up property prices.

People ramping prices either zero understanding of economics otherwise they would realize that credit needs to expand for prices to rise.



[Edit] supply and Demand have almost Fall to do with the prices of property. 99% of it is ability to pay and outbid.

In some ways that makes sense. And during the boom there was a failure on the part of both the banks and the people when purchasing the houses in regards credit checks.

That's changed though and the long term losses felt by both sides of the fence have made people wary.

stevedublin wrote: »

You are assuming house prices will go down, but they are already starting to rise in some areas.

In the blink of a eye that can change though. Its obvious that south Dublin has a severe supply issue. The introduction of long term costs(property tax) and repossessions can halt that increase in the next five years.

Snakeblood

stevedublin wrote: »

You are assuming house prices will go down, but they are already starting to rise in some areas.

He's assuming they don't get to be what they were worth during the biggest bubble in Irish history. They don't have to keep dropping to be lossmaking.

zl1whqvjs75cdy

stevedublin wrote: »

You are assuming house prices will go down, but they are already starting to rise in some areas.

Ah so we wait for property bubble number two I see. Excellent. *buys everything in sight*

When this goes tits up bail me out yeah?

khards

There will be no property bubble 2 and it will take decades for prices to return to bubble valuations. (See Japan for example of this)

That is unless banks start giving out whopping great mortgages so people can outbid each other on houses they like.
Prices have been rising in Dublin due to cash buyers buying up a verry limited supply of properties. In reality these ash buyers would have been better holding out for repos, but then you just cant tell some people.

I think that this chart sums up Ireland position well:



You can clearly see that the number of new mortgages issued drove up prices and now people are left with huge debts.
Since the volume of lending collapsed SALE prices have also collapsed.

cookie1977

Bubble or not (hopefully not!) long term (10, 15 or 20 years time), prices will rise with: demand, credit availability, immigration, population increases, inflation... If those with difficult but sustainable mortgages (if a workable solution could be found such as split mortgage etc...) are allowed time they will pay back their debts and may well turn a profit for the bank/taxpayer.

Yes of course there has to be repossessions of unworkable mortgages but not all of those in arrears have these. Getting to the bottom of why people (somewhat foolishly in my mind) are not interacting with the banks about their debts and why banks are doing so called "attractive" deals for some very select mortgagees in difficulty (without publishing the info and forcing people to sign non disclosure agreements), is one way of figuring this mess out.

Yes we know that some/many of those in arrears are probably holding out for such a "sweet" deal with the bank and if the details are published maybe more will join them in not paying BUT if there is open transparency about the fixes/solutions and equally the punishments for can pay wont pay, then I think we can get slowly begin to put this sorry mess behind us.

khards

http://www.irishtimes.com/business/sectors/financial-services/honohan-hopes-very-few-family-homes-will-be-repossessed-1.1455865

The Governor [Mr Honohan] suspects that there is a “backlog of buy to lets” waiting to be repossessed by the banks.

B0110cks, more like he knows.

uberalles

khards wrote: »

http://www.irishtimes.com/business/sectors/financial-services/honohan-hopes-very-few-family-homes-will-be-repossessed-1.1455865



B0110cks, more like he knows.

Lack of repros is increasing rents now.
Less (value) stock available > people continue to rent > rent increases.

If more repro were released to market
People would buy > 1 less renting > rents decrease.

Its not the only reason for rent increases
Some people have rumored that property tax is being off loaded onto tenants.

Ive heard a 2 bed apt had its rent increased by 200 euro PM in Sandyford recently. 200 PM !

Could some please release the pressure valve by getting BTL repros on the market ASAP. How long must we sing this song?

khards

I think the something interesting that can be taken away from the curreent restriction of supply is that the worse the restriction becomes the less it take to tip the balance, for example:

20,000 properties to rent -> average rent of €900pcm
10,000 properties to rent -> average rent of €1,000pcm
5,000 properties to rent -> average rent of €1,200pcm
3,000 properties to rent -> average rent of €1,400pcm
...
100 properties to rent -> average rent of €3,000pcm
1 property to rent -> average rent of €10,000pcm
2 properties to rent -> average rent of €5,000pcm
100 properties to rent -> average rent of €3,000pcm
3,000 properties to rent -> average rent of €1,400pcm

It can be seen from looking at the Daft report that the number of properties on th e market and the average rental price in non-linear and it would not take much to tip the rental balance.
It is only going to take about 1,000 new rentals to the Dublin market to make a big impact on rent. Professional investors know this and that is why they are not piling into the rigged Dublin market.

gaius c

khards wrote: »

I think the something interesting that can be taken away from the curreent restriction of supply is that the worse the restriction becomes the less it take to tip the balance, for example:

20,000 properties to rent -> average rent of €900pcm
10,000 properties to rent -> average rent of €1,000pcm
5,000 properties to rent -> average rent of €1,200pcm
3,000 properties to rent -> average rent of €1,400pcm
...
100 properties to rent -> average rent of €3,000pcm
1 property to rent -> average rent of €10,000pcm
2 properties to rent -> average rent of €5,000pcm
100 properties to rent -> average rent of €3,000pcm
3,000 properties to rent -> average rent of €1,400pcm

It can be seen from looking at the Daft report that the number of properties on th e market and the average rental price in non-linear and it would not take much to tip the rental balance.
It is only going to take about 1,000 new rentals to the Dublin market to make a big impact on rent. Professional investors know this and that is why they are not piling into the rigged Dublin market.

Made a similar point here. Making tenants extremely value-hungry is going to bite landlords on the butt if the supply side of the equation increases.

Villa05

David Hall's twitter https://twitter.com/davidhall75/status/357519443481473026

My information is that Ulster bank have 4000-4600 cases ready to go for repossession very soon

khards

I read this somewhere before too.

Not surprising there is a backlog since very few properties have been repossessed in the last few years. In every country there is a natural level of repossession due to various reasons such as job loss and relationship breakup. Why does David Hall think that Ireland is any different?

gaius c

Villa05 wrote: »

David Hall's twitter https://twitter.com/davidhall75/status/357519443481473026

He's a bit of a quack though so I wouldn't consider his information any more reliable than I would if he pronounced that he had a "one size fits all" legal solution to prevent repos.

uberalles

Villa05 wrote: »

David Hall's twitter https://twitter.com/davidhall75/status/357519443481473026

1 in 4 UB mortgages are paying 0 Ive heard.

Ray Palmer

uberalles wrote: »

Lack of repros is increasing rents now.
Less (value) stock available > people continue to rent > rent increases.

If more repro were released to market
People would buy > 1 less renting > rents decrease.

Its not the only reason for rent increases
Some people have rumored that property tax is being off loaded onto tenants.

Ive heard a 2 bed apt had its rent increased by 200 euro PM in Sandyford recently. 200 PM !

Could some please release the pressure valve by getting BTL repros on the market ASAP. How long must we sing this song?

Where does the family go that had their house repossessed? Will they not replace the person who was renting and bought at the very least?

Some households will split as a result of the pressure so in fact they will require 2 properties.

Mean while as people get older and there is not the same advantage of staying with parents rent free will rent their own place further. This could further increase the demand for rental property.

Now how many of the repossessions will be in high demand areas? Probably less than low demand areas. A few reason for that such as able to get a rent to afford the mortgage, more employment in those areas etc...

I think it is very simplistic to see a one for one return on repossessions and flawed to think that the repossessions will culminate in the high demand areas having more supply. By their very nature the high demand areas will mean there are less need for these to be repossessed.

City properties will likely keep rising and demand will increase. A 3 bed semi is still highly desirable and the go to demand on property in Ireland. They haven't been building them in the cities for a while now.

The market is much more complex than people think.

roro2

CSO data today (based on mortgage drawdowns only):

Prices were 1.2% higher in June 2013 than in June 2012, following a 1.2% increase in the month. This increase was the third successive monthly price rise and the largest one-month increase since September 2006, almost 7 years ago. The three-month price change, often a more reliable indicator of the general direction of property prices, was +2.3% in June – the largest three-month increase since 2007. The recent improvement in prices has come from both Dublin property prices and from price increases seen outside the capital. Dublin property prices increased by 1.7% in June and have increased by 2.4% over the past three months. Property prices outside of Dublin increased for the third successive month in June (the first occasion this has happened since 2007) and were 0.7% higher in the month and 2.1% higher in Q2.

Cue the repeat back-and-forth on mass repossessions going to drive prices through the floor, current property boom in SCD, etc...!

uberalles

Ray Palmer wrote: »

Where does the family go that had their house repossessed? Will they not replace the person who was renting and bought at the very least?

Some households will split as a result of the pressure so in fact they will require 2 properties.

Mean while as people get older and there is not the same advantage of staying with parents rent free will rent their own place further. This could further increase the demand for rental property.

Now how many of the repossessions will be in high demand areas? Probably less than low demand areas. A few reason for that such as able to get a rent to afford the mortgage, more employment in those areas etc...

I think it is very simplistic to see a one for one return on repossessions and flawed to think that the repossessions will culminate in the high demand areas having more supply. By their very nature the high demand areas will mean there are less need for these to be repossessed.

City properties will likely keep rising and demand will increase. A 3 bed semi is still highly desirable and the go to demand on property in Ireland. They haven't been building them in the cities for a while now.

The market is much more complex than people think.

Agreed, Its very complex.

But they are not all families. If a BTL investor is under water, his under water portfolio averages 5 in Ireland. If these properties we released onto the market at a normal market price a family renting could but it. Possibly a family who were originally priced out of the market by the same BTL speculators in the first place.

Also - Where do families go if they dont pay their Mortgages? Well where do renters go if they dont pay rent?
Only a lot quicker.

Ray Palmer

roro2 wrote: »

CSO data today (based on mortgage drawdowns only):

Prices were 1.2% higher in June 2013 than in June 2012, following a 1.2% increase in the month. This increase was the third successive monthly price rise and the largest one-month increase since September 2006, almost 7 years ago. The three-month price change, often a more reliable indicator of the general direction of property prices, was +2.3% in June – the largest three-month increase since 2007. The recent improvement in prices has come from both Dublin property prices and from price increases seen outside the capital. Dublin property prices increased by 1.7% in June and have increased by 2.4% over the past three months. Property prices outside of Dublin increased for the third successive month in June (the first occasion this has happened since 2007) and were 0.7% higher in the month and 2.1% higher in Q2.

Cue the repeat back-and-forth on mass repossessions going to drive prices through the floor, current property boom in SCD, etc...!

What I think is kind of funny is people then keep referring back to the peak of the market as gauge that people rely on to say how much trouble people were in . I would like to see prices and quantities in one chart. I am pretty sure that when the peak hit sales had dropped off. I saw a house for sale at the peak for €560k and nobody bought it. Houses hadn't been for sale in the area in about a year prior to this. The house that sold prior to that sold for €480k. Houses now selling at €320k+ depending on condition. I head people refer to the peak price as €560k so in theory €240 from peak to them but others will say €480k was the peak so €140k from the peak now.

57% of market peak or 71%? So then ask yourself how many houses sold at the peak of the 150 in the area it looks like 2 sold in 2006,2 in 2005, 4 in 2004, 0 in 2003, 0 in 2002 . None in 2007-12. The relevance of peak prices in the area seems small. It also doesn't equate to the 50% of peak prices. 3 bed semi are still in demand. This North Dublin.

Ray Palmer

uberalles wrote: »

Agreed, Its very complex.

But they are not all families. If a BTL investor is under water, his under water portfolio averages 5 in Ireland. If these properties we released onto the market at a normal market price a family renting could but it. Possibly a family who were originally priced out of the market by the same BTL speculators in the first place.

Also - Where do families go if they dont pay their Mortgages? Well where do renters go if they dont pay rent?
Only a lot quicker.

Here is the nub of the problem. If BTL is in a high demand area the chances are it won't be in trouble. No idea what you mean by averages 5 of under water portfolio. If you mean 1 in 5 BTL are in arrears it still isn't a bonanza in high demand areas.
What makes you think a family that was priced out of the market to buy a few years ago is now in stable financial situation and able to afford to buy?

Those who can't afford rent are subsidised by the state. It take a long time to kick a tenant out who isn't paying their rent. In fact these are likely causes for BTL being in arrears. Doesn't mean the property will be repossessed. Any owner occupier forced out of their house is likely to need to rent afterwards some will have to go on RA. Some will move back with family but the majority are not going to disappear from the rental market. It brings down the increase in rental properties from any repossessions. We still aren't talking about a huge increase to rental supply.

jmayo

Ray Palmer wrote: »

Here is the nub of the problem. If BTL is in a high demand area the chances are it won't be in trouble.

I don't know how you can say that ?
If the property is in a high demand area then in all likelihood the owner may have paid a high amount to buy it in the first place.
They may have released equity in that high demand area property to buy even more in less high demand areas which is something you know well happened.
They may have mortgage repayments that are below rental income and were living in hope of capital appreciation.
they may have been working off interest only loans up until recently.

As you say yourself it is a complex situation.
It depends how the landlord financed the property and how it is tied to his entire portfolio.
If the rental was bought in a well thought out business footing then everything should be fine, but we both know a large chunk of those who grew their little property empires during the bubble were sailing very close to the wind leaving very little margin for error.

Ray Palmer wrote: »

No idea what you mean by averages 5 of under water portfolio. If you mean 1 in 5 BTL are in arrears it still isn't a bonanza in high demand areas.

You keep mentioning high demand areas, but not every property be it for rental or for sale is going to be in a high demand area.
The only time almost all of the property in Ireland was in high demand area was during the bubble and see how that ended.

People will always like to live or rent in particular areas, but if they can't afford them they move into other areas.
Of course that can have a knock on affect of increasing demand and prices, but I counter there can be somewhat of a converse effect.

Ray Palmer

jmayo wrote: »

I don't know how you can say that ?
If the property is in a high demand area then in all likelihood the owner may have paid a high amount to buy it in the first place.
They may have released equity in that high demand area property to buy even more in less high demand areas which is something you know well happened.
They may have mortgage repayments that are below rental income and were living in hope of capital appreciation.
they may have been working off interest only loans up until recently.

The other point is

Rent coming in regularly pretty much guarantees you can keep the property. Are you trying to suggest the majority of BTLs bought more than one property to rent out? A minority did this to even bring it up as a substantial impact is a bit much. Even with rent below mortgage the likelihood of repossession is close to zero and an extended mortgage period is likely. You don't have to rely on capital appreciation. Once the mortgage is paid off you have an income of rent. So what if it take a bit longer that is still the standard BTL plan.

jmayo wrote: »

As you say yourself it is a complex situation.
It depends how the landlord financed the property and how it is tied to his entire portfolio.
If the rental was bought in a well thought out business footing then everything should be fine, but we both know a large chunk of those who grew their little property empires during the bubble were sailing very close to the wind leaving very little margin for error.

You seem to suggest that there is a huge portion of people with multiple rental properties. This is news to me .

jmayo wrote: »

You keep mentioning high demand areas, but not every property be it for rental or for sale is going to be in a high demand area.
The only time almost all of the property in Ireland was in high demand area was during the bubble and see how that ended.

People will always like to live or rent in particular areas, but if they can't afford them they move into other areas.
Of course that can have a knock on affect of increasing demand and prices, but I counter there can be somewhat of a converse effect.

The reason I mention high demand areas is it impacts the most people. Not a big deal if the rental market collapses in Donegal while Dublin rents keep going up. Even during the boom high demand areas existed and it did not encompass the whole country.

You can't exactly rent in Donegal and commute to Dublin in any practical sense. When rent and demand was squeezed in Dublin people did move out a bit further and rent rose close by. This is just the natural expansion and contraction of market. There is a radius distance that determines how far that goes. It won't reach Donegal. Where the jobs are will always matter along with commuting distances these restrictions stay in place and are more relevant now. Fuel will always go up, commuting times likely to go longer and employment is generally around densely populated areas. These factors won't change.