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

cookie1977

Do people think the Irish banks hold off increasing std. var. rates this time following the ecb's decision today to cut their rate by 0.25%? While there's lots on trackers I do feel for people struggling already on std. var. rate mortgages as they just have to take it since the fixed rates (those banks that offer them) are insanely high.

D3PO

cookie1977 wrote: »

Do people think the Irish banks hold off increasing std. var. rates this time following the ecb's decision today to cut their rate by 0.25%? While there's lots on trackers I do feel for people struggling already on std. var. rate mortgages as they just have to take it since the fixed rates (those banks that offer them) are insanely high.

Already being discussed in the thread re todays reduction.

My take would be nothing to occur for approx. 2 quarters at which point I would expect the first of two variable rate rises to happen next year probably both quarter point rises.

cookie1977

D3PO wrote: »

Already being discussed in the thread re todays reduction.

My take would be nothing to occur for approx. 2 quarters at which point I would expect the first of two variable rate rises to happen next year probably both quarter point rises.

I'd tend to agree. They have shown no mercy in this respect.

The_Conductor

cookie1977 wrote: »

Do people think the Irish banks hold off increasing std. var. rates this time following the ecb's decision today to cut their rate by 0.25%? While there's lots on trackers I do feel for people struggling already on std. var. rate mortgages as they just have to take it since the fixed rates (those banks that offer them) are insanely high.

While I hope std variable rates stay at their current levels and aren't increased- the simple fact of the matter is the ECB overnight rate, is not the rate that our lending institutions are borrowing money at. The capacity of lenders to borrow has improved lately- e.g. BOI got off a 1 billion, 10 year, bond sale yesterday @ 1.85%- which has to be applauded. AIB is not in a comparable situation- and pays considerably more than this, despite the fact that they are viewed as a wholly state owned (well 85% anyway) institution.

There is no immediate impetus to increase rates- and the politics are such that they'd not get away with it for a while, on foot of the current rate cut. A few months down the road- when the cut is gathering dust- is a different story.

D3PO

totally agree with this which is why I suspect Q2 next year is when we can expect a variable rate rise.

cookie1977

The_Conductor wrote: »

While I hope std variable rates stay at their current levels and aren't increased- the simple fact of the matter is the ECB overnight rate, is not the rate that our lending institutions are borrowing money at. The capacity of lenders to borrow has improved lately- e.g. BOI got off a 1 billion, 10 year, bond sale yesterday @ 1.85%- which has to be applauded. AIB is not in a comparable situation- and pays considerably more than this, despite the fact that they are viewed as a wholly state owned (well 85% anyway) institution.

There is no immediate impetus to increase rates- and the politics are such that they'd not get away with it for a while, on foot of the current rate cut. A few months down the road- when the cut is gathering dust- is a different story.

Previously in other quarters some of the banks have increased their std. var. rates immediately after an ECB rate cut. I don't think they'll get away with it this side of Christmas politically alright.

It's a toughy. If they hadn't gone crazy with trackers in the boom we might have more stable std var rates and even viable fixed rates but again due to the banks mistakes/gambling the customers on some level end up paying again.

D3PO

yeah I really cant fathom why more offers to buy out trackers haven't occurred. Not that Id personally take one, but there are a lot of people who would take a deal either to get out of neg equity and sell up or just because of short term thinking that would benefit the bank.

Im not talking about tricking people out of trackers but putting an offer on the table and seeing how it goes. Yes means crystalising some losses on their balance sheets but could be worse.

An offer to write down mortgage balances to move off trackers has the added benefit for a bank of also positively impacting their deposit to loan ratio if only by the backdoor.

off topic but there is merit in at least them considering it.

cookie1977

The deals that were on offer by the banks were very poor though. Paltry sums compared to the benefits of a tracker. Instead they found some one else to pile the cost onto. Std. Var. Rate holders.

D3PO

oh I know I just mean I don't understand why reasonable offers are not being made.

The Spider

Orlaw3136 wrote: »

The current set of artificial influences on the market are, amongst other effects, protecting people who are in living circumstances beyond their means to the detriment of others.

That's unfair.

And in order to justify repossessions I shouldn't have to prove that some other objective is being achieved at the same time, nor should I have to argue for repossessions and only repossessions to the exclusion of e.g. building new stock where the market warrants it.

The stock response against repossessions however is couched in one or all of the following terms :-

(a) shure we all partied and we're all fecked.
(b) repossessions will achieve nothing.
(c) they should be building more homes (so I can stay in mine).

To which my responses are :-

(a) **** off. Lots didn't. They are now however confronted with a nonsensical housing market and can choose either or to put that aspect of their lives on hold for the forseeable future or pay a premium imposed by something other than supply/demand.

(b) Doesn't have to achieve anything beyond the normality of realising a security. That's what happens when you don't/can't repay a loan. Its normal. And in order to achieve a normal housing market we need normality.

(c) They can build more homes. They should build more homes if the market warrants it. If you can afford to live in one you can even buy or rent one of them. Of course, while the market is this distorted its impossible to make good decisions on what the supply side influencers are and how to react to them.

Seriously. If you can't afford to live in your house, you can't live there. Anyone in that scenario has my full sympathy, but not for one moment should your problems be directly imposed on somebody else to their immediate detriment. I'm all for honouring the societal contract but this kind of ****e is exactly what turns people into them/us. A hand up. Not a hand out please.

77% of people in Ireland own their own homes 21% rent, you my friend are in the minority, government plays to the majority, I've said it before the only people interested in lower prices are renters, a lot of who are transient and don't vote.

Banks don't want lower prices either does NAMA, homeowners certainly don't and either does the government.

There will be no wide scale reposessions, in fact the only thing that will drive down prices is another Anglo/Banking event or external factor, no one can predict that.

Again depends on your age, if you're hitting mid thirties, it could be ten years before prices drop or not as the case may be, no one can predict it, and even if they do what are the chances of a 25 year mortgage when you're heading towards fifty?

handlemaster

The ecb dropping the ecb rate today will only make deposit holders use the cash to invest. Been Ireland top of that list will be property

cookie1977

I could have sworn there was an antagonistic post around here a minute ago.

lima

The Spider wrote: »

77% of people in Ireland own their own homes 21% rent, you my friend are in the minority, government plays to the majority, I've said it before the only people interested in lower prices are renters, a lot of who are transient and don't vote.

Orlaw3136 is right though. It's strange to see why the 'it's ok to live for free' brigade think that some of us are crazy for being angry about already over-expensive property going higher due to vested interest manipulation of the market

cookie1977

A report on Sky News - Jeff Randell from an economist with BNP Paribas said we could move into negative savings rates and hit 0% on the ECB rate due to the fact that the inflation rate is 0.7% at present when the ECB's raison d'etre is to maintain it at around 2%. He said that it could be held for a long time at 0% and he saw this happening possibly at the next ECB meeting or the one after.


The inflation rate is so low partly due to the lack of credit and the uncertainty in the eurozone. Cutting wages and increasing taxes is all impacting on the low inflation rate too. It does seem that that at present the US is the best example of you CAN SPEND yourself out of a recession and the EU is the best example of you CANT TAX yourself out of a recession.

Villa05

The Spider wrote: »

77% of people in Ireland own their own homes 21% rent, you my friend are in the minority, government plays to the majority, I've said it before the only people interested in lower prices are renters, a lot of who are transient and don't vote.

Banks don't want lower prices either does NAMA, homeowners certainly don't and either does the government.

There will be no wide scale reposessions, in fact the only thing that will drive down prices is another Anglo/Banking event or external factor, no one can predict that.

Again depends on your age, if you're hitting mid thirties, it could be ten years before prices drop or not as the case may be, no one can predict it, and even if they do what are the chances of a 25 year mortgage when you're heading towards fifty?

The ratio is 70:30 to be precise.

Admire your honesty, of course banks, Gov and NAMA want higher prices, they are the only true beneficiaries. Homeowners might think they benefit, that's why its easy for the aforementioned to control the market. How have the 20% in arrears benefited from higher prices, how many more are just keeping there head above water just to keep mortgage payments current

The current course of not dealing robustly with arrears will absolutely guarantee a catastrophic event will occur.

Are you OK with our children paying double current prices + paying higher taxes to cover the cost of the last decade, + getting paid much less because their parents wanted to protect their own income.
Will your children be choosing your nursing home in future years .

Villa05

cookie1977 wrote: »

Most of the Danske portfolio is commercial property or georgian houses. I doubt you'll see lots of regular houses up for grabs:
http://www.irishtimes.com/business/sectors/commercial-property/distressed-portfolio-could-go-for-140m-1.1546424
http://www.irishtimes.com/business/sectors/commercial-property/danske-bank-to-offload-wide-range-of-properties-1.1450395
http://www.worldpropertychannel.com/featured-columnists/done-deals/green-reit-commercial-property-portfolio-real-estate-reit-bank-of-ireland-park-rite-stephen-vernon-dublin-7572.php

The bit that sticks out like a sore thumb for me is the fact that they will be selling individual properties rather than selling as a portfolio of properties.

If I remember correctly a portfolio of Liam Carrolls Dublin properties was reported to have been sold last week at a price of 90% below peak values.
Would NAMA be the seller? Dublin property of any category has not fallen 90%

The Spider

Villa05 wrote: »

The ratio is 70:30 to be precise.

Admire your honesty, of course banks, Gov and NAMA want higher prices, they are the only true beneficiaries. Homeowners might think they benefit, that's why its easy for the aforementioned to control the market. How have the 20% in arrears benefited from higher prices, how many more are just keeping there head above water just to keep mortgage payments current

The current course of not dealing robustly with arrears will absolutely guarantee a catastrophic event will occur.

Are you OK with our children paying double current prices + paying higher taxes to cover the cost of the last decade, + getting paid much less because their parents wanted to protect their own income.
Will your children be choosing your nursing home in future years .

The 20% in arrears, will benefit from higher prices, because the higher they go the further they're dragged out of negative equity, if anything they didn't benefit from lower prices.

As for my or anyone else's children paying double prices? In 1995 my first proper corporate job I was paid 12 grand a year, by 2000 new entrants to the company were paid 18 grand a year for doing the same job, now after the crash and taking into account euro conversion, someone coming in would be paid between 29 and 33 grand.

So you see where wages are going up on a constant trajectory over the long term, so prices may double over time but so will wages and so will the price of a pint.

indiewindy

Villa05 wrote: »

The bit that sticks out like a sore thumb for me is the fact that they will be selling individual properties rather than selling as a portfolio of properties.

If I remember correctly a portfolio of Liam Carrolls Dublin properties was reported to have been sold last week at a price of 90% below peak values.
Would NAMA be the seller? Dublin property of any category has not fallen 90%

His portfolio wasnt all residential, but these mega discounts seem to only be available to those in the know or hedge funds and not the general public.

cookie1977

indiewindy wrote: »

His portfolio wasnt all residential, but these mega discounts seem to only be available to those in the know or hedge funds and not the general public.

And this is a huge problem. Investors are again moping up property instead of people with/without families which is like the pre boom.

Good primetime show on tonight about the lack of social housing. It was reported that over 100,000 people are on the waiting list for social housing which is quite staggering.

Victor

The Spider wrote: »

77% of people in Ireland own their own homes 21% rent, you my friend are in the minority, government plays to the majority, I've said it before the only people interested in lower prices are renters, a lot of who are transient and don't vote.

No need for such comments

Moderator

MysticalRain

The Spider wrote: »

The 20% in arrears, will benefit from higher prices, because the higher they go the further they're dragged out of negative equity, if anything they didn't benefit from lower prices.

As for my or anyone else's children paying double prices? In 1995 my first proper corporate job I was paid 12 grand a year, by 2000 new entrants to the company were paid 18 grand a year for doing the same job, now after the crash and taking into account euro conversion, someone coming in would be paid between 29 and 33 grand.

So you see where wages are going up on a constant trajectory over the long term, so prices may double over time but so will wages and so will the price of a pint.

I think the basic point you're missing is that in a typical housing bubble, house price rises tend to far outpace wage inflation. So ultimately nobody but a handful of vested interests really benefit from rising prices.

Even taking your point about the negative equity crowd at face value, it doesn't really matter for most of them anyway as they would never have planned on selling their houses, and would probably have struggled to pay their mortgage even if the housing boom had continued.

The Spider

MysticalRain wrote: »

I think the basic point you're missing is that in a typical housing bubble, house price rises tend to far outpace wage inflation. So ultimately nobody but a handful of vested interests really benefit from rising prices.

Even taking your point about the negative equity crowd at face value, it doesn't really matter for most of them anyway as they would never have planned on selling their houses, and would probably have struggled to pay their mortgage even if the housing boom had continued.

I think the point is that if they weren't in negative equity and were struggling, they could sell the house, more than likely gain some capital and move. At the moment if they sell the house they crystallise their losses and carry a large debt with them for the rest of their lives, and this is what's adding to the inertia in the market, if they didn't carry the debt you might see a lot more houses on the market.

lima

The Spider wrote: »

I think the point is that if they weren't in negative equity and were struggling, they could sell the house, more than likely gain some capital and move. At the moment if they sell the house they crystallise their losses and carry a large debt with them for the rest of their lives, and this is what's adding to the inertia in the market, if they didn't carry the debt you might see a lot more houses on the market.

It is such a s*itty situation as I would like to see the Negative Equity people pay every single cent of what they owe, else sell their houses, but they refuse to do this and there is no one forcing them to sell, so they can just hang on and wait for prices to rise due to the vested interest manipulation of the market.

In the meantime people are saying 'feck it, I have to buy' and when they all go out together to try to buy a family house in a nice area the guard/nurse couple who never bought in the boom are standing there with 150-200k of saved up money and/or inheritance and 300-360k mortgage approval, ready to get their house whatever the price, since there are literally only a handful of decent houses in the area they live in.

Meanwhile the 25-35 group who don't have big deposits are refused mortgage approval and have to rent. More renters on the market now so supply/demand dictates higher prices, mr london property investor decides to spread the London risk by cash buying an apartment or two in Dublin as they are dirt cheap and have a decent yield. Such is the requirement for city-centre rentals in Dublin, everybody wants to get in on it and next thing apartment prices are going up

All the while mr ex-coke-party boy who had a construction job and bought a 500k gaff with a kitchen island and tv in each room is now settled down and has a kid with another one on the way hasn't paid a mortgage in 4 years now and is pocketing the rent from his 'BTL' and off-shoring it to an account god knows where!

Meanwhile I come back to Ireland after my 20's abroad and say 'hey, I heard there was a party, and you all spent money you didn't have?' and everyone's like 'ah feck off ya begrudger!'

and I haven''t even gotten to George Morduant or Ivan Yates yet!!

I love Ireland..

gaius c

Let me get this right. Folk in neg equity benefit from rising prices because they can reduce the hit on selling their place but when they look for somewhere else, they have to pay more?

Err I don't think so.
http://en.wikipedia.org/wiki/Zero-sum_game

The Spider

gaius c wrote: »

Let me get this right. Folk in neg equity benefit from rising prices because they can reduce the hit on selling their place but when they look for somewhere else, they have to pay more?

Err I don't think so.
http://en.wikipedia.org/wiki/Zero-sum_game

Not really, they reduce the hit by moving somewhere else, for instance if someone sells a house in Sandymount and moves to Raheny they more than likely will get a cheaper house?

If someone sells in Blanchardstown and moves to Maynooth, they will get a cheaper house, the only way they'd have to pay more is if they stayed in the same area and didn't downsize or moved to a more salubrious area, and as we're talking specifically about people who are defaulting, I don't think moving to a cheaper area would be the issue.

The_Conductor

The Spider wrote: »

If someone sells in Blanchardstown and moves to Maynooth, they will get a cheaper house, the only way they'd have to pay more is if they stayed in the same area and didn't downsize or moved to a more salubrious area, and as we're talking specifically about people who are defaulting, I don't think moving to a cheaper area would be the issue.

You've obviously not gone house hunting in Maynooth recently.......
Looking at the current Sherry Fitzgerald newletter for Naas- they've houses north of 500,000 again in the town.........

Whether or not we like it- we seem to have another bubble inflating at a fast and furious rate........

Orlaw3136

The_Conductor wrote: »

You've obviously not gone house hunting in Maynooth recently.......
Looking at the current Sherry Fitzgerald newletter for Naas- they've houses north of 500,000 again in the town.........

Whether or not we like it- we seem to have another bubble inflating at a fast and furious rate........

No biggity.

Buy the biggest lump of house you can find, and assuming past performance is a predictor of future outcomes (and why would it not be) you can just stay there whether you can afford to pay the mortgage back or not.

The_Conductor

Orlaw3136 wrote: »

No biggity.

Buy the biggest lump of house you can find, and assuming past performance is a predictor of future outcomes (and why would it not be) you can just stay there whether you can afford to pay the mortgage back or not.

Sigh......
At the risk of simplying things beyond any recognition- Ireland has to be the only country in the world where repaying your debts is entirely optional.

Cuddlesworth

The_Conductor wrote: »

Sigh......
At the risk of simplying things beyond any recognition- Ireland has to be the only country in the world where repaying your debts is entirely optional.

Not true. The debts will be paid. It just seems more and more likely that they will be paid by everybody else in form of write downs and bank bailouts from the extreme losses.

gaius c

It's quite simple. House in Sandymount increases by 20%. Negative equity reduced to €50k and all your savings wiped out to extricate yourself from that hole.

And now you're told that it's "good news" that the house you had been hoping to move into in Raheny has also increased by 20% and you still have no savings.

You have no knowledge whatsoever of what happens in such a market. Look at the UK in busts past. Folks in negative equity knuckled down and paid it off if they had the means or they went for bankruptcy. Your notion that folk can move house after blowing their net worth on high house prices is fanciful in the extreme.