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

Calina

Mustard1972, you have now put more effort into refusing to provide data to support your position than it would have cost you to support the data in the first place.

I have to wonder why.

As a general note - since you seem to be pointing at the daft data - for property sales, it focused on asking prices for most of the period up to 2010 - I don't know if they have switched over to the data available in the PPR because I haven't read their reports for a while given I can get at the PPR data myself. Asking prices do not tend to be an illustration of prices, but of market perceptions. In terms of pointing at the actual market, they have tended to be misleading in anything other than sentiment. For most of the period 2003-2006 they under measured the market. For most of the period since they have overmeasured the market.

I also am not sure why you have selected 2003 as a benchmark cut off to decide whether property prices are low or not. By 2003, rises in property prices had well outstripped rises in salaries. The rises were more of a function of available low priced credit rather than available wealth to pay. Available credit has contracted and the unemployment rate is now about 14%. There is the added issue that the profile of available property changed a lot in that time.

If your rationale is that property prices are low now because they are lower than in 2003, well I'm not sure you've provided any supporting argument for that assertion.

Frank Lee Midere

If prices are to continue to rise at 10% a year the cash buyers are going to need very big pockets. Particularly if repossessions start.

I reckon that cash buyers spent between 1.2B - 1.5B in the last year assuming 50-60% of transactions and mostly in Dublin. ( Mostly Irish buyers). My guess is cash was waiting for a perceived bottom to poo into the market. The first sign of stabilisation and in they went. That will last until another downturn. Then cash will flee.

handlemaster

Frank Lee Midere wrote: »

If prices are to continue to rise at 10% a year the cash buyers are going to need very big pockets. Particularly if repossessions start.

I reckon that cash buyers spent between 1.2B - 1.5B in the last year assuming 50-60% of transactions and mostly in Dublin. ( Mostly Irish buyers). My guess is cash was waiting for a perceived bottom to poo into the market. The first sign of stabilisation and in they went. That will last until another downturn. Then cash will flee.

There's good returns in Dublin this is what is driving up the prices. I don't know why you say cash buyers will need more cash to buy when repossessions start.

gaius c

handlemaster wrote: »

There's good returns in Dublin this is what is driving up the prices. I don't know why you say cash buyers will need more cash to buy when repossessions start.

Increase in supply would imply an increase in transactions to soak up this supply and the capability to absorb this supply AND keep prices where they are just isn't there if you're depending on bank lending so hypothetical cash buyers would have to become an even bigger part of the market to maintain prices in the face of higher volume.

lima

gaius c wrote: »

Increase in supply would imply an increase in transactions to soak up this supply and the capability to absorb this supply AND keep prices where they are just isn't there if you're depending on bank lending so hypothetical cash buyers would have to become an even bigger part of the market to maintain prices in the face of higher volume.

I'm starting to really believe that Repossessions won't happen in a way that would cause prices to fall again. The vested interests seem to have it all worked out//

Thargor

I honestly cant decide which way its going to go, they kind of have to start reposessing dont they? How many years of free rent are people not paying their mortgages going to get? If it goes on much longer strategic default will become an epidemic, not exaggerating, its becoming a major topic of conversation in the last year for a lot of people I know, asking themselves if they're being fools by doing the right thing paying what they owe on time.

Snakeblood

Thargor wrote: »

I honestly cant decide which way its going to go, they kind of have to start reposessing dont they? How many years of free rent are people not paying their mortgages going to get? If it goes on much longer strategic default will become an epidemic, not exaggerating, its becoming a major topic of conversation in the last year for a lot of people I know, asking themselves if they're being fools by doing the right thing paying what they owe on time.

If there's no consequence to not paying back debt, then they are fools for paying it. Sad, really.

uberalles

lima wrote: »

I'm starting to really believe that Repossessions won't happen in a way that would cause prices to fall again. The vested interests seem to have it all worked out//

+1

I imagine it like this.

IF .... A group of property market price manipulators were gathered at the start of the property price decline and told that they had almost every tool at their disposal to make the dip as high as possible and to make the recovery as fast as possible they have done and incredible job.

It is the work of genius in the middle of a recession that prices are rising.
Some of this is by chance, but some tools used were manipulation without a doubt.

Oh look what happened in Japan ......... it took 10 years to recover .... it will be the same here. We didn't count on the Irish way of thinking.

Lots of Judges, solicitors, accountants and every vested interest in the land has land. Inc your relatives.

Property is the most protected investment class.

Repro will give a "bit" of supply and choice to the market so you will get a bigger garden or better aspect, but you have the panicked herd chasing those.

On top of that the investors are back. The govt allowing no Capital gains for 7 years on property versus 1% - dirt tax on deposits. If you had 250K to invest would you leave it in a bank?

Property porn is back. Grab those breakfast rolls lads.

Around the world people gravitate towards the citys where the work is.
Dublin and commutable property are lifting first. America and UK are lifting now as well.

Could be worse .... 1% Stamp duty and 50% off the price from 2008.

gaius c

uberalles wrote: »

Oh look what happened in Japan ......... it took 10 years to recover .... it will be the same here. We didn't count on the Irish way of thinking.

Actually Japan has been in recession or stagnant for much of the last 24 years and a good chunk of the reason why is that after their bubble popped, they diverted financial resources into propping up firms that were deemed "too big to fail". This took resources from companies that might have provided growth and instead ploughed them into companies that were doomed.

We're doing something similar with the great property debt black hole in this country. If the economic powerhouse of Asia with control of their own currency & interest rates couldn't do it, I fail to see how we'll succeed when we have none of their advantages.

For an inkling of just how serious this could get for us, look at how Spanish public debt hastened their end of their empire and kept a former superpower in poverty for the best part of 300 years. Or closer to home, the Darien Scheme ended Scotland as an independent nation.

jmayo

lima wrote: »

I'm starting to really believe that Repossessions won't happen in a way that would cause prices to fall again. The vested interests seem to have it all worked out//

Our one hope is The Troika who are still around until they get at least 75% of their money back.

Something has to be done about the banks and AFAIK there is a new round of stress testing coming our way.

Sooner rather than later, the banks have to face the mounting mortgage debts and they will need further capital.
The big question is do they risk massive right offs and hitting deposits or do they chase people for their debts with smaller hits on deposits.
Either way writing off debts and letting people keep their assets would seem impossible.
But this is Ireland so God knows what someone will try.



For an indication of where the viability of our financial system is going just take a look at Rabo pulling out.
That says more about our future than any Indo article or RTE news item pimping property could ever do.

The Spider

Been away on holiday, south of Spain, nice this time of year, I came back and lo and behold prices are rocketing on the way up in Dublin, and not only that, like I said previously the lack of supply in Dublin would lead people into commuter towns again where there's better value, and start to push those prices up, below (I know Indo) link.

http://www.independent.ie/business/personal-finance/property-mortgages/housing-market-surge-now-spreads-outside-capital-29705054.html

As for repossessions, they're not going to happen in any large numbers, the only repos will be voluntary. Too much for everyone to lose, higher prices means more property tax for the government, and people will pay it because they now feel richer. A way out of negative equity in sight for other people who own.

I don't think this is going to crash any time soon, the last time rises went from 1995-2007, and the falls weren't worked through until 2011 that's sixteen years. May not happen this time but there will be absolutely no falls in Dublin anyway for over 2 years, no supply available. If and it's a big if repossessions happen, they will be carefully orchestrated so that people won't even know it's going on.

jay0109

The Spider wrote: »

As for repossessions, they're not going to happen in any large numbers, the only repos will be voluntary. Too much for everyone to lose, higher prices means more property tax for the government, and people will pay it because they now feel richer. A way out of negative equity in sight for other people who own.

I don't think this is going to crash any time soon, the last time rises went from 1995-2007, and the falls weren't worked through until 2011 that's fifteen years. May not happen this time but there will be absolutely no falls in Dublin anyway for over 2 years, no supply available. If and it's a big if repossessions happen, they will be carefully orchestrated so that people won't even know it's going on.

Unfortunately, I agree with you. Repossessions will be tightly managed and won't happen in a meaningful manner

Thargor

So people will just be handed free houses on a massive scale? I think you're being a bit dismissive. The troika are going nowhere until they recover 75% of their money and they wont stand for it.

The Spider

Thargor wrote: »

So people will just be handed free houses on a massive scale? I think you're being a bit dismissive. The troika are going nowhere until they recover 75% of their money and they wont stand for it.

I didn't say that, I said there wouldn't be repossessions, more likely the debt will be written down to the value of the house, but they'll be kept strung along as long as possible as prices are rising. Troika won't get their money if houses are all repossessed and put on the market at once and then crashes the housing market, that is never going to happen.

Rising prices make people feel richer and spend money in the economy which means more taxes for the troika, the crash has been and gone, for at least the next two years anyway, I don't think anyone can predict further than that, and even that's based on the absolute lack of supply.

stevedublin

As part of the bailout agreement, Ireland has agreed to make the banks tackle 15% of mortgages in significant arrears by 31st of December (which includes repossession if no agreement with mortgage holder can be made).
I'm not sure how this can be enforced though if Ireland is exiting the bailout on December 15th.

Piriz

stevedublin wrote: »

As part of the bailout agreement, Ireland has agreed to make the banks tackle 15% of mortgages in significant arrears by 31st of December (which includes repossession if no agreement with mortgage holder can be made).
I'm not sure how this can be enforced though if Ireland is exiting the bailout on December 15th.

good point stevedublin, was wondering about the enforcement of this too, anyone know?

handlemaster

Piriz wrote: »

good point stevedublin, was wondering about the enforcement of this too, anyone know?

I don't think the heads are going to come.out of the sand anytime soon

moxin

The Spider wrote: »

Rising prices make people feel richer and spend money in the economy

Most journal.ie readers disagree with you which is refreshing. Only 15% agree with your "rising prices is a good thing" theme in this thread, that's 600 people so far out of 3,800. There still is sanity out there!
http://www.thejournal.ie/poll-house-prices-1152539-Oct2013/

Uriel.

moxin wrote: »

Most journal.ie readers disagree with you which is refreshing. Only 15% agree with your "rising prices is a good thing" theme in this thread, that's 600 people so far out of 3,800. There still is sanity out there!
http://www.thejournal.ie/poll-house-prices-1152539-Oct2013/

You found sanity on the journal? Wow it seems there might be bigger concerns than the property market after all :-P

Ray Palmer

moxin wrote: »

Most journal.ie readers disagree with you which is refreshing. Only 15% agree with your "rising prices is a good thing" theme in this thread, that's 600 people so far out of 3,800. There still is sanity out there!
http://www.thejournal.ie/poll-house-prices-1152539-Oct2013/

Seriously a poll run on any website is extremely bias. There is no quality control and multiple voting often happens from people feeling strongly.

There are a lot of people that don't even read the Journal let alone read the article and voted on it. You might as well go to a fox hunt and ask who agrees or disagrees with a ban. It is that bias. The Journal base readers may not even in the housing market or likely to be for a while.

People still believe any price rise is a bubble and can't even say when the bubble started the last time. Reading the comments on the Journal you can see how extreme some views are.

The article explains the situation relatively well but is bias too.

The_Conductor

Ray Palmer wrote: »

The Journal base readers may not even in the housing market or likely to be for a while.

Its a sister website of Boards.ie and shares a vast preponderance of users with this site. An IP check will also show forum users in here, are in the main, regular users of the Journal.

It may be a straw poll- but totally dismissing it out of hand, isn't valid either.

cookie1977

The_Conductor wrote: »

Its a sister website of Boards.ie and shares a vast preponderance of users with this site. An IP check will also show forum users in here, are in the main, regular users of the Journal.

It may be a straw poll- but totally dismissing it out of hand, isn't valid either.

Lets put it this way, it's not statistically valid.

The_Conductor

cookie1977 wrote: »

Lets put it this way, it's not statistically valid.

Having studied statistics- its possible that it is statistically valid- however there are factors that we are not aware of.

jmayo

stevedublin wrote: »

As part of the bailout agreement, Ireland has agreed to make the banks tackle 15% of mortgages in significant arrears by 31st of December (which includes repossession if no agreement with mortgage holder can be made).
I'm not sure how this can be enforced though if Ireland is exiting the bailout on December 15th.

I have a feeling the troika and more particularly the EU/ECB are going to have a say in how this country is run for a long time.
They have admitted as much claiming they are going to be around until they get 75% of their money back.

It has also been said that if the government get their emergency credit line, to avert the case that there is a loss of market confidence in Ireland, then Ireland is going to have to adhere to possibly even tougher fiscal policy conditions.

Our borrowing costs will jump massively if lenders think we are going to be forking yet more huge wads of cash into the banks to cover mortgage losses.
What will make it worse is us seemingly giving people a free get out jail card on their debts.
Then we are back into the arms of the troika.

For anyone that thinks, and we all know at least one poster around here who does, that there can be massive debt writeoffs rather than any meaningful repossessions, then I ask where is the money going to come from ?

If the banks need massive recapitalisation then we either find it ourselves or go ask "our friends" in Europe.
Our friends in Europe will demand that we let no one off the hook easily i.e. not repossess and let people off who have been playing silly buggers.

Either way we could end up having to savagedly raid bank deposits e.g hit deposits above 20k, 40k or some such limit.

However unpalatable to kick people out of houses they haven't paid for, try sell to savers that the few quid they have put away is going to be hit so that the ones who can't be ar**ed repaying their mortgage get a free ride.

Also hitting deposits would also see a flight of large capital from the state.
For anyone old enough they will remember all those non resident accounts to avoid dirt.
Well nowadays it is a lot easier to set up an internet based bank account in an offshore jurisdiction and whereas dirt is only aimed at the interest funding recapitalisation is hitting the capital sum.

As regards where this country is heading I think it is most aptly illustrated yet again by another foreign bank pulling out.
And as for this talk of recovering property prices can I remind people that the number of lenders in the market is now shrinking by the day.

Ray Palmer

The_Conductor wrote: »

Its a sister website of Boards.ie and shares a vast preponderance of users with this site. An IP check will also show forum users in here, are in the main, regular users of the Journal.

It may be a straw poll- but totally dismissing it out of hand, isn't valid either.

Sorry I worked in statistic and no way has it any validity as a view of the entire population and has no validity as a sample

The_Conductor

Ray Palmer wrote: »

Sorry I worked in statistic and no way has it any validity as a view of the entire population and has no validity as a sample

And what would make it valid. Standing at the crossroads in Tallaght and asking passerby's your questions? Or Oranmore in Galway? Or pick somewhere nominally neutral- Lucan in West Dublin? Good luck to you getting a representative population. This is why they've had to withdraw all those medical surveys- because their randomised surveys- were anything but. As a straw poll- and having captured the IP addresses- its better than nothing. It is valid statistically- but not to the degree of confidence you'd attribute to other data types. I estimate production figures- based on sample sizes of less than 2% of the overall production level, and with a return of less than 40%. Is that valid? No- but its as good as it gets.

You have to remember- different confidence intervals are attributed to different data types. Medical type data requires 98-99% confidence. General polling data- 90%, Randomised resource sampling- 75%.

Arguably- no sample of the population is accurate- because people tend to tell pollsters, what they think the pollsters want to hear. Thats why political polls are so badly wrong. However- its also why crowdsourcing data works so well (and accurately calls election results even now in the US).

I don't teach statistics anymore- but I did for long enough.

Ray Palmer

The_Conductor wrote: »

And what would make it valid. Standing at the crossroads in Tallaght and asking passerby's your questions? Or Oranmore in Galway? Or pick somewhere nominally neutral- Lucan in West Dublin? Good luck to you getting a representative population. This is why they've had to withdraw all those medical surveys- because their randomised surveys- were anything but. As a straw poll- and having captured the IP addresses- its better than nothing. It is valid statistically- but not to the degree of confidence you'd attribute to other data types. I estimate production figures- based on sample sizes of less than 2% of the overall production level, and with a return of less than 40%. Is that valid? No- but its as good as it gets.

You have to remember- different confidence intervals are attributed to different data types. Medical type data requires 98-99% confidence. General polling data- 90%, Randomised resource sampling- 75%.

Arguably- no sample of the population is accurate- because people tend to tell pollsters, what they think the pollsters want to hear. Thats why political polls are so badly wrong. However- its also why crowdsourcing data works so well (and accurately calls election results even now in the US).

I don't teach statistics anymore- but I did for long enough.

Well while you were teaching this you may never worked in the practicalities of it. It is actually very simple you simply make sure your sample size has the same portions of the full demographic. When I worked in market research and was a member of the Market Research Society there were rules on how details were collected and how they were accurate. For example when we used phone surveys the script had to be neutral and we also had to put in a note saying the surveys were slightly bias due to only including people who had landlines.

A web poll does not have any checks what so ever. Bad information is not better than nothing as it can be so completely bias. Would you consider a poll on the Daily Mail site to be a fair representation of the UK?

Calina

Ray Palmer wrote: »

Well while you were teaching this you may never worked in the practicalities of it. It is actually very simple you simply make sure your sample size has the same portions of the full demographic. When I worked in market research and was a member of the Market Research Society there were rules on how details were collected and how they were accurate. For example when we used phone surveys the script had to be neutral and we also had to put in a note saying the surveys were slightly bias due to only including people who had landlines.

A web poll does not have any checks what so ever. Bad information is not better than nothing as it can be so completely bias. Would you consider a poll on the Daily Mail site to be a fair representation of the UK?

No, but while I absolutely wouldn't consider self selecting polls which is what most online polls are to be statistically valid, the Journal one might have an interesting piece of information.

The internet based community is generally biased in favour of younger people although the top end age is probably growing in much the way as it is for Facebook. The FTB market is also generally biased towards younger people. Much of our media does a lot to suggest and imply that property prices rising/being high are good. If the younger generation are not buying this, as suggested by a self selecting poll from a cohort of younger people, this is something which would bear more investigation from a more targeted and better designed survey; ie, is there a split in the perception of the value of higher prices with younger people considering lower prices to be better maybe because it is a utility cost and older people considering higher prices to be better because property is an asset.

So while it doesn't tell you something directly, it may be an interesting source for a hypothesis which can be investigated in more detail.

Additionally - given that 30 years ago, picking 1000 people at random coming out of mass would have given you a reasonable picture of Ireland - randomly picking 1000 journal readers might have the same impact now. So for me the issue is not that they are journal readers, but that they are self selected rather than randomly selected.

gaius c

Calina wrote: »

No, but while I absolutely wouldn't consider self selecting polls which is what most online polls are to be statistically valid, the Journal one might have an interesting piece of information.

The internet based community is generally biased in favour of younger people although the top end age is probably growing in much the way as it is for Facebook. The FTB market is also generally biased towards younger people. Much of our media does a lot to suggest and imply that property prices rising/being high are good. If the younger generation are not buying this, as suggested by a self selecting poll from a cohort of younger people, this is something which would bear more investigation from a more targeted and better designed survey; ie, is there a split in the perception of the value of higher prices with younger people considering lower prices to be better maybe because it is a utility cost and older people considering higher prices to be better because property is an asset.

So while it doesn't tell you something directly, it may be an interesting source for a hypothesis which can be investigated in more detail.

Additionally - given that 30 years ago, picking 1000 people at random coming out of mass would have given you a reasonable picture of Ireland - randomly picking 1000 journal readers might have the same impact now. So for me the issue is not that they are journal readers, but that they are self selected rather than randomly selected.

Amen. The current (and future) generation of FTB's are not buying because they are instead buying tickets to Australia & Canada. There's also less of them to start with so even if they stayed, there'd be lower demand from them than there was with the mid-late 70's baby boom buying houses during the noughties.

Ray Palmer

Calina wrote: »

No, but while I absolutely wouldn't consider self selecting polls which is what most online polls are to be statistically valid, the Journal one might have an interesting piece of information.

The internet based community is generally biased in favour of younger people although the top end age is probably growing in much the way as it is for Facebook. The FTB market is also generally biased towards younger people. Much of our media does a lot to suggest and imply that property prices rising/being high are good. If the younger generation are not buying this, as suggested by a self selecting poll from a cohort of younger people, this is something which would bear more investigation from a more targeted and better designed survey; ie, is there a split in the perception of the value of higher prices with younger people considering lower prices to be better maybe because it is a utility cost and older people considering higher prices to be better because property is an asset.

So while it doesn't tell you something directly, it may be an interesting source for a hypothesis which can be investigated in more detail.

Additionally - given that 30 years ago, picking 1000 people at random coming out of mass would have given you a reasonable picture of Ireland - randomly picking 1000 journal readers might have the same impact now. So for me the issue is not that they are journal readers, but that they are self selected rather than randomly selected.

I think to suggest FTBs are primarily young and internet users you might have missed the masses of people who were priced out during the boom who are now FTBs.

Given people who might be really angry and bothered by property prices would be drawn to the article you have an extremely bias view.

It might lead to investigation but that doesn't make it any more valid.

30 years ago when 90% of the population went to Sunday mass it was a relatively accurate way to get surveys. The journal has no where near that kind of coverage. It is utter nonsense to say this poll is has any valid statistical value given it has absolutely no quality checks. Multiple votes are common on such threads.

If you have never noticed interest groups jumping on these polls I think you are really misguided to consider them valid.

Given that the issue is actually also complex asking the public a question in itself can be quite pointless unless contained in a full survey. I worked on the Eurobarometer for a number of years and it was very interesting to see how answers had to be teased out to get to how people felt. Instead of saying "are you racist" there were several questions to find the level of racism for example.

If you want to trust polls from the Journal fell free but it is unreasonable to say everybody else should and using such a faulty source don't be surprised if you are way off an accurate prediction.