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

Fighting Irish

Galego wrote: »

But in the cases of repossessions and having to write debts off..........who is going to pick up that bill? Taxpayers again?

:rolleyes:

jay0109

The Spider wrote: »

Not really, if you don't have a mortgage then you don't have a problem, it's up to you whether you buy or rent but as it stands you don't actually have a massive debt.

The actual problem as opposed to an existential problem is that lots of people borrowed too much from the banks, after it has to be said being encouraged by the banks, maybe both sides should have looked harder, either way they didn't.

The only way the actual problem can be solved is by higher house prices, people can sell their houses at a profit and they're not in debt, the banks loans are backed by assets that match the amount borrowed.

The taxpayer makes more money from NAMA, people are more confident they spend in the economy, and put their houses on the Market increasing supply.

Who loses? Potential buyers have to pay more, but as I said that isn't a problem until someone buys.

WOW, just WOW:eek:

The next generation pick up the tab...lovely hurling

who_ru

The Spider wrote: »

Yup, only way to solve the immediate problem is with high house prices, I'm aware that it isn't good for the people who have yet to buy, but then again they're not in debt.

If the banks repossess they have to sell at a loss, so we all know that the taxpayer is up to their neck in the banks and it's in their interest that the banks not be at a loss.

Do you suggest that people even when they've had their house repossessed continue to pay the bank for the remainder over thirty years as well as pay to rent a home?

That isn't possible in any scenario, especially if they've lost jobs etc. The state ends up picking up the tab as well as the tab for the loss on the house.

Sorry but are you Charlie Weston from the Indo by any chance?

The Spider

jay0109 wrote: »

WOW, just WOW:eek:

Other solution please, instead of staring agape. the fact is the only ones in trouble are the people in debt, and like it or not, I can't see any other way out for themselves or the banks except higher house prices.

If you think there's another solution, please let me know, and remember people out of work can't pay the remainder mortgage on a repossessed house and rent a house, without the state doing it for them.

So either way the next generation picks up the tab through higher taxes.

The Spider

who_ru wrote: »

Sorry but are you Charlie Weston from the Indo by any chance?

Again put forward an alternative solution that doesn't include higher house prices.

gaius c

Mustard1972 wrote: »

Villa05 and Gaius c are like on 2 man bear strike force.
You guys would even look into the tea leaves and find a way to interpret them into telling us the sky is falling.
Entertaining though.

Play the ball. Not the man.
Just a suggestion.

gaius c

jay0109 wrote: »

WOW, just WOW:eek:

The next generation pick up the tab...lovely hurling

Killing the spending power of people who are not overburdened with the debt of the previous bubble is a proven method of economic recovery!

johnnyskeleton

The Spider wrote: »

Other solution please, instead of staring agape. the fact is the only ones in trouble are the people in debt, and like it or not, I can't see any other way out for themselves or the banks except higher house prices.

If you think there's another solution, please let me know, and remember people out of work can't pay the remainder mortgage on a repossessed house and rent a house, without the state doing it for them.

So either way the next generation picks up the tab through higher taxes.

Repossess, sell for what the market will bear, borrowers remainder can be repaid or they can declare bankruptscy. It's so simple but politically unwise in a country where a significant portion of the population bought into the Irish dream.

The Spider

johnnyskeleton wrote: »

Repossess, sell for what the market will bear, borrowers remainder can be repaid or they can declare bankruptscy. It's so simple but politically unwise in a country where a significant portion of the population bought into the Irish dream.

Sounds simple, but again wont solve the problem immediately, and you're left with the issue of people either in debt they can't afford, or a vast majority filing for bankruptcy, which will put the skids on the economy for years.

Higher house prices will mean people can get out reasonably intact and the banks have an asset that can achieve a price close to the loan taken out on it.

I haven't heard any other solutions, unpalatable as it may be to people who haven't bought yet, but then again to every one with skin in the game it will get them out of the hole.

Potatoeman

The Spider wrote: »

Sounds simple, but again wont solve the problem immediately, and you're left with the issue of people either in debt they can't afford, or a vast majority filing for bankruptcy, which will put the skids on the economy for years.

Higher house prices will mean people can get out reasonably intact and the banks have an asset that can achieve a price close to the loan taken out on it.

I haven't heard any other solutions, unpalatable as it may be to people who haven't bought yet, but then again to every one with skin in the game it will get them out of the hole.

Your solution is to pass on the problem to another generation and potentially cause another crash. A large part of the housing crisis was unsustainable mortgage payments for couples that lost their jobs or got pay cuts.

High house prices only benefit those with multiple properties as people have to live somewhere they also reduce disposable income. NE can prevent you from trading up but the flip side is that you would pay even more trading up in a stable market.

The Spider

Potatoeman wrote: »

Your solution is to pass on the problem to another generation and potentially cause another crash. A large part of the housing crisis was unsustainable mortgage payments for couples that lost their jobs or got pay cuts.

High house prices only benefit those with multiple properties as people have to live somewhere they also reduce disposable income. NE can prevent you from trading up but the flip side is that you would pay even more trading up in a stable market.

I'd disagree that high house prices only benefit people with multiple properties, if house prices are high and you're repossessed, then that will cover the cost to the bank and you're not left with a debt you can't afford whilst trying to rent somewhere else.

There is only one way out and that's house prices continue to rise, and hold that at some stage in the future inflation will somehow manage to erode the debt.

Like it or not if people see their primary asset is actually worth something, they're more inclined to spend in the economy and not save all their cash. This has a knock on effect for businesses across the economy.

The

stevedublin

I actually agree with The Spider in that high property prices are best for the country as a whole (but undoubtably bad for some people e.g. those trying to get their foot on the property ladder), and he has explained why clearly.
However, this does not mean that they actually will continue to go up.
I think this dead cat bounce will end early next year when most of the impatient buyers will have run out, people realise the economy is not so good and repos start to come onto the market.

Potatoeman

The Spider wrote: »

I'd disagree that high house prices only benefit people with multiple properties, if house prices are high and you're repossessed, then that will cover the cost to the bank and you're not left with a debt you can't afford whilst trying to rent somewhere else.

There is only one way out and that's house prices continue to rise, and hold that at some stage in the future inflation will somehow manage to erode the debt.

Like it or not if people see their primary asset is actually worth something, they're more inclined to spend in the economy and not save all their cash. This has a knock on effect for businesses across the economy.

The

Lower house prices mean lower mortgage payments which results in more sustainable mortgages and more money in the economy. People that bought during the peak will still have high mortgage repayments and NAMA exposes the taxpayer to falling property prices but any artificial bottom to the property market will just delay recovery. The value of the property is inconsequential if your not intending to move and the repayments will be the same no matter what the property is worth.

People that complain about NE preventing them from moving forget that their mortgage would be even bigger in a market with high property prices and trading up more expensive.

The Spider

Potatoeman wrote: »

Lower house prices mean lower mortgage payments which results in more sustainable mortgages and more money in the economy. People that bought during the peak will still have high mortgage repayments and NAMA exposes the taxpayer to falling property prices but any artificial bottom to the property market will just delay recovery. The value of the property is inconsequential if your not intending to move and the repayments will be the same no matter what the property is worth.

People that complain about NE preventing them from moving forget that their mortgage would be even bigger in a market with high property prices and trading up more expensive.

You're missing the point, if people bought at the peak and wanted to sell if prices continue to rise, they can sell without a loss, which means they won't have a debt to repay to the bank.

It's one thing to say that NE only matters if you move, but what about being in NE and having lost your job, you lose the house (repo'd) have no job and have a massive debt to the bank, as well as somehow having to pay rent and put a roof over your familys head?

The other fact is psychological, if your asset is worth more than you paid for it then even if you don't move, you have mental wealth in your head, as in "if the worst comes to the worst I can sell the house and move on!"

This in turn makes you more likely to spend that spare cash in the pub, restauraunt, shop etc, because at the back of your mind you feel relatively wealthy.

If its in NE you save every penny and build up a war chest, because you never know when you're going to need it.

Tigerandahalf

It is hard to see how house prices can increase over an extended period.
The money and wage level simply isn't there. To me there seems to be only one solution - print money to fix the bank's balance sheet and do deals with people in debt.

The Spider

Tigerandahalf wrote: »

It is hard to see how house prices can increase over an extended period.
The money and wage level simply isn't there. To me there seems to be only one solution - print money to fix the bank's balance sheet and do deals with people in debt.

Well printing money is definitely one way around it, inflation by another name, so that say 2 euro only has the spending power of 1 euro wages double, so do prices, however the debt already incurred stays at the original level.

That will wipe out the debt that people have, only issue is because we don't have our own currency, this would have to happen across the euro zone, probably unlikely.

In the past this would have been the obvious way out.

The_Conductor

Tigerandahalf wrote: »

To me there seems to be only one solution - print money to fix the bank's balance sheet and do deals with people in debt.

Lol......
Aside from the side effect of run-away inflation- were we to go printing money (look what happened in the Weimar Republic), we don't have the capacity to print money- we are after all part of a monetary union- and the ability to inflate our way out of the mess- is not there.

You can do limited deals with people in debt- but we do not have the capacity to do widespread deals- nor do we have the capacity to borrow to support such a programme (potential investors would laugh us off the face of the planet were we to go to them with proposals like this).

We can afford very limited debt deals- we need to crystalise the losses, such as they are, burn borrowers and burn banks balance sheets, and hope and pray that we don't need to recapitalise them again (though even this is questionable- some notable economists are already predicting that limited debt deals could lead to a further call for capital of between 20 and 30 billion- on top of what we've already given them).

The_Conductor

The Germans are particularly cautious concerning inflation- and will not support any monetary policies that they view as expansionist to the point of creating inflation of above the target (of 2%). A level of 2% is modest enough- but even 2% would halve the real value of the debt by 50% within a 35 year period.

We're not going to have widespread debt forgiveness.
We're not going to print money.
We are spreading our repaying back over as long a period of time as possible- to lower the absolute cost of the principle on the loans- despite the interest being substantial in its own right.
The poor taxpayer is going to carry the bucket (yet again).

The Spider

The_Conductor wrote: »

The Germans are particularly cautious concerning inflation- and will not support any monetary policies that they view as expansionist to the point of creating inflation of above the target (of 2%). A level of 2% is modest enough- but even 2% would halve the real value of the debt by 50% within a 35 year period.

We're not going to have widespread debt forgiveness.
We're not going to print money.
We are spreading our repaying back over as long a period of time as possible- to lower the absolute cost of the principle on the loans- despite the interest being substantial in its own right.
The poor taxpayer is going to carry the bucket (yet again).

Unless house prices hopefully continue to rise, that should hopefully take the burden away from the taxpayer and only people who choose to buy will pay.

The_Conductor

The Spider wrote: »

Unless house prices hopefully continue to rise, that should hopefully take the burden away from the taxpayer and only people who choose to buy will pay.

How do you make this out?
We're already in hock to the tune of 220 billion.
Almost a third of our total tax take is going to be interest payments- largely to non-resident investors (aka we can't even tax the payments).
Lenders aren't lending- so buyers, such as they are- are by and large cash purchasers- often with the support of Mommy and Daddy remortgaging their PPR to support their children.
Taxes and charges are only going up.
Interest rates are not going to stay at their current levels for ever either- normalisation would imply a 4% rise on their current levels.
Expenditure is going down.
We are continuing to suck money from the economy.
The potential for house prices- is not for them to increase in the short to medium term- on the contrary- its for continued falls.
For those in negative equity and paying their loans- its only a paper loss. For those not paying their loans- its a different story- we have to figure how to crystalise those losses with minimal further hit to the taxpayer.

I just don't get this magic money tree- or the 'we'll inflate our way out of trouble' ideas- we don't have a magic money tree- and we're not going to inflate away the losses. Its not going to happen.

The_Conductor

Ps- the people who choose to buy- you mean my children and my grandchildren in 20-30-40-50 years time? Aka- sure, we'll pawn off the debt on future generations?

The Spider

The_Conductor wrote: »

Ps- the people who choose to buy- you mean my children and my grandchildren in 20-30-40-50 years time? Aka- sure, we'll pawn off the debt on future generations?

Again an existential problem as opposed to an actual problem, nobody knows what's going to happen in the future, if we did this wouldn't have happened.

As I said earlier the actual problem is people have too much debt, the assets that back that debt aren't worth the loan, the best thing that can happen for the people, the banks, the taxpayer and the government is for house prices to keep rising. That solves the actual problem, not a future event.

As for the money, it seems to be coming from somewhere judging by the rate of price increases north and south in Dublin.

The_Conductor

The Spider wrote: »

Again an existential problem as opposed to an actual problem, nobody knows what's going to happen in the future, if we did this wouldn't have happened.

Its not an existential problem. We have a defined repayment schedule for our debts- stretching up to 37 years into the future. These are payments we have undertaken to make. These are not hypothetical.

The Spider wrote: »

As I said earlier the actual problem is people have too much debt, the assets that back that debt aren't worth the loan, the best thing that can happen for the people, the banks, the taxpayer and the government is for house prices to keep rising. That solves the actual problem, not a future event.

Yes- people do have too much debt. In the 1980s- when the country went bankrupt and the IMF were called in- the central government was bankrupt- but there was very little in the way of private sector/personal debt. On this occasion- the central government is bankrupt- but, so too is the private sector and people on a personal level. We had the capacity to manage our way out of our mess previously- given the low levels of private debt we had- we do not have this luxury now.

If we have house prices rising- all this simply means is- the nascent property market- grind to a halt. There are a limited number of cash buyers, chasing a limited number of available properties- both are finite in nature- and the supply of available property is most finite in North and South Dublin. This does not mean there is a recovery underway (far from it)- it simply means fundamental laws of economics are at play.

The Spider wrote: »

As for the money, it seems to be coming from somewhere judging by the rate of price increases north and south in Dublin.

Its very limited in nature- and the price rises are for very specific property types- and on low overall turnover of properties. So yes- there are price rises- but the rate of transactions are less than a twentieth what we would expect- if we had a normally functioning market.

In addition to this- South Dublin and most of North Dublin (with a few notable examples)- were the areas of highest demand in the country (and continue to be)- yet were where some of the lowest rates of completions occurred. We go for very low density housing in this country- and we don't have much space to build in North and South Dublin- so we didn't build much there- but people still want to live there- so its simple supply and demand.

The Spider

Well let's see how it plays out, I reckon the lack of decent properties in Dublin is going to start pushing up prices in commuterville, people who then want to live in Dublin will then be forced to take a look at apartments, it'll take about two years but it's going to happen.

The thing is everyone wants it to happen, people who bought, the banks and the government.

37 years of debt? No visible way out, not a chance, Irish people love houses too much, even this whole thread is dedicated to having more houses to buy. Sorry but the mentality in Ireland is I must have a house. Banks are lending if you've got a decent job and deposit, I bought last year and had zero problems with a mortgage, I had an outstanding overdraft from 15 years ago that I forgot about and it wasn't a problem, don't kid yourself that it's peoples parents, there's plenty of people in Dublin with good jobs, check out LinkedIn for the amount of jobs available at any time.

Villa05

This is like something from the twilight zone, no wonder the largest property website is called daft

Tigerandahalf

If the banks don't get printed money how can they ever repair or balance their balance sheet. Paying down debt simply sucks money out of the economy. Similarly the gov is paying down debt with its austerity programme but it is also sucking money and jobs out of the economy. The debt the gov has built up can never be paid off. One solution would be to leave the EU.

Potatoeman

The Spider wrote: »

You're missing the point, if people bought at the peak and wanted to sell if prices continue to rise, they can sell without a loss, which means they won't have a debt to repay to the bank.

It's one thing to say that NE only matters if you move, but what about being in NE and having lost your job, you lose the house (repo'd) have no job and have a massive debt to the bank, as well as somehow having to pay rent and put a roof over your familys head?

The other fact is psychological, if your asset is worth more than you paid for it then even if you don't move, you have mental wealth in your head, as in "if the worst comes to the worst I can sell the house and move on!"

This in turn makes you more likely to spend that spare cash in the pub, restauraunt, shop etc, because at the back of your mind you feel relatively wealthy.

If its in NE you save every penny and build up a war chest, because you never know when you're going to need it.

If you bought a home then it does not matter and as for the psychological factor, you don't own the value of your property it is meaningless unless you are going to sell. Lower repayments result in actual extra disposable income rather than perceived income.

The_Conductor

Tigerandahalf wrote: »

One solution would be to leave the EU.

I genuinely don't see how this could ever happen.
Certainly there are aspects of our membership that in retrospect should have been better bartered- some of our best assets were once viewed almost with disdain, its only in retrospect that we begin to appreciate that which was once taken for granted.

I don't see that it would be a benefit to us to leave the Union- we have far too much to loose if we go down that road.

Tigerandahalf

The public balance sheet is still far from fixed. After this budget it will still be some €10 billion in the red I think. How the gov can find that €10 billion only means more cuts in pay, indirect taxes and maybe increased taxes. Smaller salaries and less money to spend on a mortgage. The young who would be buying are unemployed or outside of the country with little prospects for the near future in Ireland. There won't be the demand either.

The_Conductor

The Spider wrote: »

Well let's see how it plays out, I reckon the lack of decent properties in Dublin is going to start pushing up prices in commuterville, people who then want to live in Dublin will then be forced to take a look at apartments, it'll take about two years but it's going to happen.

The thing is everyone wants it to happen, people who bought, the banks and the government.

The increases in Dublin are by and large limited to freehold family type properties with gardens, in desireable areas, with good access to transport routes and amenities. The issue and the reason these are in demand- is we built so few of them- and virtually none in the desireable areas of Dunlaoghaire Rathdown and South Dublin. Even in these areas- the apartments that were built are continuing to fall in price- there are some notable developments- Bernard McNamara's Merrion development- and of course the incomplete Beacon Quarters. Even NAMA hasn't seen the value in completing these- though they are being completed on a piecemeal basis.

We've had property bubbles before in Ireland- and bursts- and we've also had the misfortune and arrogance of the banks some of whom have had to be bailed out more than once. You're probably not old enough to remember the bubble in agricultural land- but we've been there before- we haven't learnt, and doubtless, in a few years time- we'll be back in the same situation again. The Dutch may have learnt from their tulips- us Irish don't seem to learn from our property. The parochial antics of our politicians haven't helped matters one iota either.

The Spider wrote: »

37 years of debt? No visible way out, not a chance, Irish people love houses too much, even this whole thread is dedicated to having more houses to buy. Sorry but the mentality in Ireland is I must have a house. Banks are lending if you've got a decent job and deposit, I bought last year and had zero problems with a mortgage, I had an outstanding overdraft from 15 years ago that I forgot about and it wasn't a problem, don't kid yourself that it's peoples parents, there's plenty of people in Dublin with good jobs, check out LinkedIn for the amount of jobs available at any time.

We have 37 years of debt. Doubtless- we will retire portions of the debt as we go by- and increment it with new debt. One way or the other though- the cheap money that we have been addicted to like drug addicts- is ending- sooner or later- and unless people accept that interest rates are 5-6-7% they will get the shocks of their lives, when this comes to pass. It may be a while coming- but it will, and thats just 'normalisation'.

We do have a uniquely Irish mentality about owning property- that puzzles many of our EU brethren. Its very unusual to have such a high ownership rate. Will we ever get over this mentality- realistically- I doubt it- but time will tell.